How much pain can we see in Asian Paints?

Shares of Asian Paints is one of the best-performing stocks in Nifty 50.

Shares of Asian Paints is one of the best-performing stocks in Nifty 50. Since the year 2002, it has given an annualized return of 31.23 per cent. So every Rs one lakh invested back in 2002 would have become Rs 1.77 crore by now. Nevertheless, from its all-time high of Rs 3505, it touched on September 24, 2021, the stock is down by almost 16 per cent. The reason for such a fall is a miss on the earnings front. The second-quarter results were not on expected lines given the rise in raw material cost. According to the management, raw material cost is highest in the last four decades. The demand, however, remains strong. 

Does this fall present a good buying opportunity for long term investors? 

To know this we did a historical analysis of the drawdown (A drawdown is a peak-to-trough decline of a share price during a specific period for an investment), of the share price of Asian Paints. Last time we saw such a fall was in the share price of Asian Paints was in February 2021, when it dropped by 20 per cent soon after it recovered its losses. 

Following table shows the top 5 drawdowns of Asian Paints since 2002.

The above table shows that the company’s share price has been quite resilient even in tough times. Purely going by the historical analysis of Asian Paints share price, it seems that we will witness a very limited fall from here. It presents a good opportunity for long ter