Investors in Indian Railway Catering and Tourism Corporation Limited (IRCTC) lost around 30,000 cr in 2 trading sessions. The stock fell to Rs 930 or 17.3% per share in value on Wednesday, bringing the overall market capitalization to 70,927.20. He had hit a record Rs 1 lakh cr M-cap on Tuesday.
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Ironically, he hit a new record of Rs 6,393 on Tuesday before turning around. The IRCTC has corrected from Rs 1960 or nearly 31 percent, since it hit its highest. The stock opened with a 10 percent loss on Wednesday and fell 20 percent on an intraday basis. It experienced high volatility at 8.19% during the trading session.
The action settled at Rs 4,432.95 on Wednesday.
The IRCTC gave returns of 232.79 percent over a one-year period, outperforming the BSE Sensex by 181.7 percent. Over one month, the returns stand at 19.57% against 4.73% given by Sensex.
Expert Opinion – Fundamental Analysis
Valuations have been exaggerated as there has been euphoria in this stock in recent days as it has become very easy for traders to make easy money every day, said Santosh Meena, head of research at Swastika Investmart. Ltd.
“We know the market is not charitable enough to make you easy to make money every day, so we are seeing a big correction in this meter,” Meena added.
There is some buzz that the government could also dilute some of its stake to take advantage of the recent rally in this meter, he said.
However, the fundamentals are still strong, he said. Technically it is trading near its 20-DMA of 4400 and if it manages to maintain that level a rebound is expected from here.
“Otherwise we can see another downside where 4000-38000 will be a critical demand area to take new buy positions,” he warned.
The company has no debt and no promoter commitments, according to Edelweiss and the information available on BSE.
Book value per share has improved over the past two years and currently stands at 48.35.
The PE ratio is 263.05.
The Return on Equity (ROE) is 18.38 percent while the Return on Capital Employed is a whopping 2,232.56 percent.
The promoter owns 67.40 percent. The holdings of foreign institutional investors (FIIs) stood at 7.81 percent as of September 21, down 0.26 percent. Life Insurance Corporation of India (LIC) holds 2.11 percent of the shares while individual investors hold 14.31 percent.
At least two analysts have said current valuations are higher and not suitable for further entry into the stock, while recommending a “hold” on IRCTC.
Choice Broking’s Sumeet Bagadia said the correction has not accompanied any major triggers and investors have seen profits in the past two trading situations. The stock is overbought and the large correction is due to the sale or recognition of profit.
Calling current valuations expensive, the chief executive sees a rebound at some point and estimates support around Rs 4,000. Investors should sell if the stock breaks that level, Bagadia said.
Meanwhile, Nilesh Jain, assistant vice president (AVP), Equity Research Technical and Derivatives at Centrum Broking, said the best strategy is to wait and watch. He advised against taking new positions, believing that the title could undergo a further correction. Existing shareholders must hold this stock for a stop loss of Rs 3,950.
If this level is exceeded there will be a drop down to Rs 3,500. Jain said he had recommended this stock on its potential for upward movement in price from the levels of Rs 2,500. This stock was a “Obvious” and on an upward trend over the past year, Jain said.
(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making a financial decision.)