Amara Raja, Exide Industries stocks drop up to 20 per cent in 2 months. Time to buy the dip?

Shares of battery manufacturers Amara Raja Energy and Exide Industries have surged in recent months, but they are now experiencing some sell-off pressure as investors appear to be booking profits. After hitting an all-time high of ₹1,775.95 apiece in late June, Amara Raja shares are trading 11.5 per cent below this level at ₹1,571 apiece.

Osho Krishan, Senior Analyst, Technical & Derivative Research at Angel One, observed that the stock has been trading within a narrow range, near its 20-day and 50-day Exponential Moving Averages (DEMA) on the daily chart. He pointed out that the recent price action has shown positive momentum as the stock approaches the sloping trendline of previous highs on the daily chart, suggesting a potential breakout.

Krishan added that if the stock decisively breaks above 1,600, it could see a strong move toward 1,700 in the near term, with solid support in the 1500-1465 zone on the downside.

Similarly, Exide Industries is trading 20 per cent below its all-time high of ₹620 per share in late June. Osho Krishan noted that the stock has entered a time-wise corrective phase, forming a base near its 100 DEMA and encountering resistance from its 50 DEMA.

At this point, the stock is hovering within a narrow range, and Krishan mentioned that a decisive breakthrough is necessary to trigger momentum. He indicated that the support level is around the 480 mark, and if breached, the stock could drop another 20–30 points.

On the higher end, a sustainable breakthrough above 515 is expected to rejuvenate momentum, potentially driving the stock towards the next resistance level of 560-570, he further added. 

Bright long-term outlook

From a long-term perspective, battery manufacturers are well-positioned due to the growth of electric vehicles (EVs) in India, a key government initiative to advance green mobility. The robust expansion of the Indian auto industry over the past three years is anticipated to drive significant replacement demand in the years ahead.

The industrial segment will also benefit from increased power backup requirements for data centres. The resurgence of thermal power generation is also expected to drive strong incremental demand, with growth visibility for the next 5–6 years. According to the analysts, exports, particularly to the Middle East, are gaining traction. 

To advance in the Lithium-ion segment, Amara Raja has recently signed a technical license agreement (through its subsidiary) with Gotion’s subsidiary to access lithium iron phosphate (LFP) technology. This move aligns with Amara Raja’s strategy to enter the Li-ion cell manufacturing space, as the company has been seeking a partnership with a leading player in this field.

Analysts believe mastering LFP technology would facilitate supplying EV battery solutions to electric passenger vehicle (PV) manufacturers. Gotion, a global leader in battery solutions, is expected to help Amara Raja gain expertise in Li-ion cell technology, supporting the company’s plans to establish Gigafactory projects.

On the other hand, Exide Industries, through its subsidiary EESL, has entered into a multi-year technical collaboration agreement with SVOLT Energy Technology Co. Ltd, a global technology company specializing in lithium-ion batteries and battery systems for EVs and energy storage applications.

Exide has also recently signed a non-binding agreement with Hyundai to supply prismatic LFP cells for one of Hyundai’s global EV platforms to be produced in India. However, as this is a non-binding agreement, further details need to be finalized by both parties to make it a binding contract. Since Exide would be producing a new cell for Hyundai, testing and validation are expected to take at least a year before commercial production begins.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.