Rainbow Foundations Soars 40% to Hit New High – What’s Driving the Construction Stock?

Dhaneshwar Prasad

Shares of Rainbow Foundations have been on an exceptional run, gaining 40% in the past week alone. The construction company’s stock closed at ₹16.89 on Friday, a sharp rise from ₹12.01 just a week ago.

Rainbow Foundations

New 52-Week High Amid Strong Buying Interest

During the week, Rainbow hit a new 52-week high of ₹17.05 on 3 out of 5 trading sessions. This was driven by strong buying interest from investors even as broader markets remained lackluster.

The stock has been rising for a month now, registering returns of nearly 50% during this period. An equally impressive rally over the last 6 months has resulted in 60% gains for shareholders.

What’s Behind the Sudden Surge?

While the exceptional price performance has cheered investors, the exchange has sought clarification from Rainbow Foundations on the reasons behind the sudden spurt in trading volumes and share price.

Sources indicate the gains could be a result of speculative buying amid thin volumes. The company is yet to respond to the exchange’s query, so details remain sketchy.

Caution Advised Till More Details Emerge

Experts advise caution while trading Rainbow Foundations at the currently elevated levels until more clarity emerges. The fundamentals may not justify the sharp upmove seen over the past month.

Retail investors should avoid bottom-fishing at this stage despite the temptation of quick gains. Some moderation can be expected once the euphoria settles down.

In conclusion, while Rainbow’s share price action has been exciting in recent weeks, sustainability is under doubt. Investors are better off waiting on the sidelines than chasing the stock after the stellar rally.

The risk-reward is not favorable without more transparency from the company on what is driving prices.

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Former Sony professional turned multi-business owner and stock investor, Dhaneshwar leverages his MBA to produce market, IPO and biz content and personal investments on Indimarket.in.
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