Nykaa shares falls after block deal; analysts say stock expensive

NYKAA shares fell on Thursday on news of a block deal worth Rs 212 crore (USD 26 million). The deal was executed at a price of Rs 148 per share - a discount of 4.5 per cent from the Wednesday closing price. Around 1.40 crore shares exchanged hands.

At around 10 am, shares of FSN E-Commerce Ventures - which operates Nykaa brand – were trading at Rs 153.30 on the NSE, down by Rs 1.80 or 1.16 per cent from the previous closing price. 

Vikas Sethi, market expert and Managing Director of Sethi Finmart Pvt Ltd said that Nykaa stock was suitable for trading perspective, at best. The valuation remains expensive for this counter if one looks at the fundamentals of the company, Sethi added.  

Despite significant corrections in the scrip since listing, the market capitalisation remains high at Rs 45,000 crore. Previous year’s net profit was just around Rs 41 crore and 6-month profit in this financial year is at only 11 crore, Sethi informed.  

The stock is “very expensive” and investors must not buy this stock with a long-term view considering the fundamentals of the company, Sethi warned.  

A short term trade can be executed if the stock falls to levels around Rs 148, Sethi further said.  

Another analyst Sumeet Bagadia said that the stock has been trading with sustained pressure and has support at levels around Rs 145. The resistance is seen at Rs 160 and any bounce back could be expected if the stock breaches this level. 

Selling pressure will continue below the resistance and if it breaches below 145, profit booking will likely be accentuated, Bagadia opined. The overall structure remains weak and it is unlikely to see a major upside at current levels, he further said.

Nykaa has underperformed the Nifty50 by over 53 per cent, giving negative returns of nearly 54 per cent versus negative 0.9 per cent returned by broader market index according to data sourced from Trendlyne. 

The stock is trading a price to book (PB) value of 32.33 which is high among its industry peers. The stock has traded with a 1-year beta of 1.  

Momentum indicators RSI and MFI are in mid range at 43.2 and 59.8. A number above 70 is considered as overbought while below 20 is considered as oversold. 

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(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.)