Though the Indian equity benchmarks have clocked strong gains in the current year so far, very few stocks have seen the gains that the stock of Happiest Minds Technologies has seen this year.
As of September 2 close, the stock had surged 333 percent in CY21.
Since its debut on the Indian bourses on September 17, 2020, the stock has surged 797 percent against its issue price of Rs 166.
This stock has built its gains gradually, with occasional bouts of profit-booking.
The stock looks expensive at this juncture and valuations appear a bit stretched - both fundamentally and technically.
Besides, analysts point out as investors are shifting their focus from the defensive sectors to the economy-centric sectors, the upside in this stock can be limited.
Most analysts believe the stock looks overbought at this juncture but they still advise to hold it.
Piyush Pandey, Lead Analyst – Institutional Equities at YES Securities said the stock appears to be overbought. Despite being a great beneficiary of the ongoing accelerated digital adoption, especially in cloud technologies, the risk-reward ratio does not look favourable.
"The valuation has become stretched as it trades at PER of 90 times on FY23 earnings. However, given the euphoria around technology stocks, the possibility of near-term correction in stock price is limited. We would recommend a 'hold' on the stock," said Pandey.
Rahul Sharma, co-founder, Equity99, too, has a 'hold' rating on the stock.
"The stock has been continuously rising since its listing and at present, it has a PE of 137 times against an industry PE of 28.4 times. So, we advise holding the stock with trailing stop-loss to the position," said Sharma.
Jatin Gohil, Technical Analyst at Reliance Securities, also has a 'hold' on the stock with a target price of Rs 2,000.
"Major moving averages are sloping upwards. Key technical indicators have reversed from their neutral level on the short-term timeframe charts and are positively poised. The stock is in the strong up-trend and poised for a fresh up-move. It can move towards Rs 1,875 initially and Rs 2,000 subsequently," said Gohil.
Likhita Chepa, senior Research Analyst at CapitalVia Global Research has a 'hold' on the stock for a medium to long term timeframe.
"Investors who have not yet added this stock to their portfolio can consider buying it at the current levels as the stock holds potential to generate decent returns in the medium to long term timeframe," said Chepa.
While the rich valuation may limit the upside of the stock in the short term, the stock looks poised for gains, in the long run, owing to its business plans and deal pipeline.
"The company is targeting to offer its services in the UK, Europe, Middle East and Australia. The company’s pipeline appears to be strong and hence it can prove to be a good long term play," said Chepa.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.