Paytm shares free fall continues; stock corrects 68% on issue price—What should investors do with this counter?

Share price of Paytm has significantly dropped post weak listing of the India's biggest IPO on the bourses.  Paytm stock was listed on the BSE at a 9% discount to Rs 1,955 per share against its issue price of Rs 2,150 on Thursday. This was a decline of 9.07% or Rs 195.  On Monday's low, shares dropped 65% on the listing price and over 68% on issue price.     

Stock of One97 Communications, Paytm’s parent, has corrected more than 20% in the last one month as on March 14, while declined over 50% in the last three months, showed technical data of the stock.     

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The counter saw sharp correction on Monday as Paytm shares fell nearly 15% to a new 52-week low of Rs 672.10 a share on the BSE in Monday's intraday trade after the Reserve Bank of India (RBI) on March 11 barred Paytm’s payments bank from onboarding new customers and asked the company to undertake an IT audit.     

Shares of new age stocks like Paytm, Zomato, Nykaa have been witnessing free fall apparently over high valuations.     

Expert are of the view that long-term story of the share remains intact, however, investor should refrain from adding new age stocks, including Paytm, at current juncture.     

Here is what market experts make of corrections in Paytm share.     

As per, Manoj Dalmia Founder and Director, Proficient Equities Limited, Paytm has been marred with controversy off late.  The central bank’s recent action against Paytm’s payments bank from onboarding new customers and Vijay Shekhar Sharma’s, arrest in Delhi on February 22, who was later released on bail in a case of rash driving, would lead to a significant impact on brand and loyalty.    

"Reduce exposure in new age stocks like Paytm, zomato"

“Yes, these regulatory actions would create a huge impact on stock in terms of price but in terms of business it would not be substantial,” said Dalmia.      

He is of the view that in the long term, the price would appreciate if business improves and good topline and bottom lines are reported.     

“Expect the stock to fall till Rs 641 and further downwards till it finds support, in a short term a retracement can be expected at Rs 735 levels. The outlook looks bearish as the management is not clear in terms of business and its strategy, disappointing shareholders from the day of listing,” he said.   

Proficient Equities Limited founded advised investors to reduce exposure in new age stocks like Paytm, zomato as they face massive selling pressures from investors. The valuations they ask are huge and are based on future business scope and not on present business, he said.    

“One may keep a small portion allocated in these stocks and go for other established businesses in small and midcap sectors with a strong business framework,” Dalmia added.    

"Invest up to 7% if your long-term views is  of more than 5 years"

Speaking of the RBI’s restrictions, Ravi Singhal, Vice Chairman at GCL Securities, said the development will do impact the stock price, though not by much, usually up to 10% in the near term.    

“However, if RBI limitations stay in place for an extended period of time, this will be an issue. In the bull case, the target for the next six months is up to 920 to 1000, while in the bear case, the target is 600 to 680,” says the expert   

GCL Securities’ Vice chairman is of the view that these are all make-or-break stocks.     

“If one can have patience and a long-term view of more than 5 years, they can invest up to 7% of their risk capital,” he adds.    

"Stock may see more selling pressure"

Ravi Singh, Head of Research and Vice President, Share India, says Paytm's recent ban on adding new customers due to likely gaps in its technology systems is definitely going to hurt the business sentiments. “The immediate impact will be negative as Paytm has already on boarded a very large customer base onto the payments bank, but the ban may affect their chances of upgrading to a small finance bank,” he says  

Singh is of the view that stock may see more selling pressure and touch the level of Rs 500 in the medium term.     

“The overall market is in correction mode. New age internet stocks like Zomato, Nykaa are also facing massive selling pressure. This may continue for some more trading sessions. However, a buying opportunity may arise if these stocks fall another 3–5%. Investors may take a fresh entry, keeping a view of the long term," he adds. 

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