Momentum Pick: IRCTC investors lose Rs 30,000 cr in two trading sessions as stock falls 31% - Check fundamental, technical views

Investors of Indian Railway Catering and Tourism Corporation Limited (IRCTC) lost around 30,000 cr in 2 trading sessions. The stock declined by Rs 930 or 17.3 per cent per equity share in value, on Wednesday, taking the overall market cap to 70,927.20. It had hit a record Rs 1 lakh cr M-cap on Tuesday.  

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Also Read: IRCTC Mcap crosses Rs 1 lakh crore, share closes at a loss of 7% 

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Ironically, it scaled a new all-time high of Rs 6393 on Tuesday before taking an about turn. IRCTC has corrected by Rs 1960 or almost 31 per cent, since hitting its high. The stock opened with a 10 per cent loss on Wednesday and fell 20 per cent on the intraday basis. It saw high volatility at 8.19 per cent over the trading session.  

The stock settled at Rs 4432.95 on Wednesday. 

IRCTC has given returns of 232.79 per cent over a 1-year period, outperforming BSE Sensex by 181.7 per cent. Over one month, the returns stand at 19.57 per cent against 4.73 per cent given by Sensex. 

Experts View – Fundamental Analysis 

Valuations have been overstretched as there has been a euphoria in this stock for the last few days because it has become very easy for the traders to make easy money every day, Santosh Meena, Head of Research at Swastika Investmart Ltd said.  

“We know that the market is not charitable enough to make you easy money every day, therefore, we are seeing a sharp correction in this counter,” Meena added. 

There is some buzz that government may also dilute some stake to get the benefit of the recent rally in this counter, he said. 

However, the fundamentals are still strong, he opined. Technically, it is trading near to its 20-DMA of 4400 and if it manages to hold this level then a bounce back is expected from here.  

“Otherwise, we can see further downside where 4000-38000 will be a critical demand zone to take fresh buying positions,” he warned. 

The company has zero debts with zero promoter pledge, according to Edelweiss and information available on BSE. 

The Book value per share has been improving over the last two years and is currently at 48.35. 

PE Ratio is at 263.05. 

The Return on Equity (ROE) is 18.38 per cent while the Return on Capital Employed is a whopping 2232.56 per cent. 

Monopoly business 

Promoter holding at 67.40 per cent. The Foreign Institutional Investors’ (FIIs) holdings are at 7.81 per cent as on September 21, down 0.26 per cent. Life Insurance Corporation of India (LIC) has 2.11 per cent stake while individual investors have 14.31 per cent holding.   

 Technical Analysis 

At least two analysts said that the current valuations are on a higher side and not suitable to make fresh entry into the stock, while recommending a ‘Hold’ on IRCTC. 

Sumeet Bagadia of Choice Broking said that the correction did not accompany any major trigger and investors booked profits over the last two trading situation. The stock is overbought, and the heavy correction is on the back of selling or profit booking.   

 Calling the current valuations expensive the Executive Director sees a bounce back at some stage and estimates a support around Rs 4000. Investors must sell if the stock breaks this level downwards, Bagadia said.  

Meanwhile, Nilesh Jain, Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking said that the best strategy is to wait and watch. He advised against making any fresh positions, opining that the stock could see further correction. Existing shareholders must Hold this stock for a stop loss of Rs 3950.   

If this level is breached, there will be a downside up to Rs 3500. Jain said that he had been recommending this stock on its potential for upward price movement from levels of Rs 2500. This stock has been a “no-brainer” and on an upward trend over the last one-year, Jain said.  

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)