Analysts said the stock’s near-vertical drop from its top is not a strong enough reason to buy it. The stock hit an all-time high of Rs 6,393 last Tuesday, which briefly took the market value to over Rs 1 lakh crore. It had gained almost 340% from January 1 to October 19. This advance was, however, making a section of the market uncomfortable.
“It is a relentless rise which has got converted into a relentless fall,” said independent market expert Sandip Sabharwal. “The profit they made in 2019 – for them to reach that level it will take two more years. Assuming ₹700 crore of profits after two years, it is trading at 75 times two-year forward earnings. For a PSU stock, it is too high.” Sabharwal said the fair value for IRCTC is Rs 1,500.
“If the current profitability of a company is not big, it becomes difficult to justify (rise) beyond a point. It is not a bad company but something that goes up 7-10 times in such a short while is bound to correct,” said Hemang Jani, head of equity strategy-broking and distribution at Motilal Oswal Financial Services.
Technical analysts said the stock may correct by another 5-6%. “The stock is looking weak and is trading below its 20-day moving average,” said Rajesh Palviya, head-technicals and derivatives at Axis Securities. “The stock may correct further to Rs 3,850 which is the next important support and the 50-day exponential moving average,” For the long-term, the stock can be bought at Rs 3,800-3,860, said Palviya.
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