The share price of Spandana Sphoorty has increased by almost 40% in just two days. Should you buy?

After rising 20% the day before, the share price of Spandana Sphoorty Financial jumped 15% in early trading on January 8.

Share price of Spandana Sphoorty: small-cap stock For the past two days, Spandana Sphoorty Financial has been doing quite well. The small-cap stock surged 15% in early trading on the BSE on Wednesday, January 8, following a 20 percent surge in the previous session.

The share price of Spandana Sphoorty opened at ₹405, up 15.2 percent from its previous close of ₹402.75, and reached ₹463.90. The stock was up 13.16 percent at ₹455.75 on the BSE at around 10:20 AM. At 78,089, the equity benchmark Sensex was down 0.14 percent.Given the day's peak of ₹463.90, the stock has risen 38% in just two trading sessions.

Trend of Spandana Sphoorty's share price
A 52-week high of ₹1,243.10 was reached by Spandana Sphoorty shares on January 12 of last year. But since then, the stock has been under pressure.

The small-cap stock has lost more than 60% of its value in the past year. It fell to ₹305.50 on December 26 of last year, a 52-week low.

Last year, its lone monthly increase was a slight 3% growth in April, which stands out as an uncommon instance of ascent.

In January, the stock has risen 38% so far, and if it continues to rise by the end of the month, it will end its eight-month losing run.

How should investors proceed?
Although there is significant bullish momentum in the small-cap stock, analysts advise waiting a while to see if the sentiment holds.

The stock of Spandana Sphoorty recently reversed sharply from ₹300-odd levels and jumped to ₹463 in just three days, indicating significant positive momentum, according to Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers.

Patel noted that a positive crossover from the MACD further validated the upward trend. Support for the stock is located around ₹400, and resistance is close to ₹500.

 "For a possible aim of ₹500–520, it is wise to purchase close to the support zone. For the time being, it is preferable to take a "wait-and-watch" strategy to keep an eye on price movement close to these crucial levels and validate any more bullish indications before making an entry," Patel stated.

Choice Broking derivative analyst Hardik Matalia noted that the stock had previously reached a peak close to ₹1,240 before going into a protracted decline. Nonetheless, there have been indications of consolidation in recent sessions close to important support zones, suggesting the possibility of a base formation. If accompanied by robust price action, this consolidation phase frequently signals a decrease in selling pressure and the potential for a trend reversal.

With the Relative Strength Index (RSI) at roughly 73, Matalia emphasized that the stock has entered overbought territory due to the significant upward rise over the previous two days. Strong bullish momentum is evident here, but care is also warranted as the stock approaches overbought levels, since this could result in short-term profit booking.

Only during a corrective decline towards the ₹400–360 area, when greater demand zones are evident, is fresh purchasing advised. A greater risk-reward ratio would be possible with this strategy. To successfully limit downside risks, a strict stop-loss should be kept at ₹300. A breach below this level could invalidate the bullish picture and indicate additional weakening, according to Matalia.

"On the upside, the ₹530 mark is where immediate resistance is seen. Further purchasing momentum might be generated by a clear breakout above this level, which could prolong the upward trend. Given the current volatility, traders are encouraged to keep a close eye on price movement around these critical levels and employ disciplined risk management techniques," Matalia stated.