Indian Railway Catering and Tourism Corporation (IRCTC), which enjoys a monopoly in the segments it operate, crashed 32 percent in two consecutive trading sessions, after hitting a record high of Rs 6,396.30 on October 19.
IRCTC is the only entity authorised by the Indian Railways to provide catering services, online tickets and packaged drinking water at railway stations and inside trains.
The stock had gained 218 percent in the last four months as the country moves towards full unlocking, and with the fall in COVID cases and strong vaccination drive.
On Wednesday, IRCTC lost 18.5 percent intraday, and on Tuesday, it fell 16.2 percent from its record high. The stock had hit a market capitalisation of Rs 1 lakh crore in the previous session.
‘IRCTC seeing a technical correction’
Experts say the fundamentals of the stock are still intact, and the correction came on the back of its overvaluation. Hence, they call it a technical correction. They advise long-term investors to not panic and hold the stock.
Santosh Meena, Head of Research, Swastika Investmart, said the fundamentals are still strong. "But there is valuation concern after a steep run and there was a clear speculative move as it was easy for traders to make money every day. So we are seeing a technical correction, and Rs 4,000-3,800 will be a critical demand zone to take fresh buying positions."
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"IRCTC’s share price has skyrocketed in recent times on the back of investors' focus on the unlock theme, which includes stocks that are expected to benefit from the normalisation of economy. There has been a sharp reversal in its trend. We do not suggest buying on dips or accumulating at current levels," said Likhita Chepa, Senior Research Analyst, CapitalVia Global Research.
Since the company enjoys monopoly in the field of its operation and has strong prospects, long-term investors can consider holding it and should avoid panic selling, she advised.
MFs reduce stake in IRCTC
Mutual funds reduced their stake in IRCTC to 4.78 percent, as of September 2021, from 7.28 percent in June 2021 quarter. The names of Nippon Life India Trustee and Aditya Birla Sun Life Trustee did not appear in the September quarter's shareholding pattern.
Foreign portfolio investors also lowered ownership to 7.81 percent from 8.07 percent in the same period, but LIC upped its stake to 2.11 percent from 1.9 percent.
Individual shareholders, with holding below Rs 2 lakh worth of shares, increased their shareholdings to 14.17 percent from 11.26 percent, but high net worth individuals reduced their stake to 0.14 percent from 0.22 percent on a QoQ basis.
Selling seen across broader markets
In fact, there was selling across the midcaps and smallcaps, which had skyrocketed in the market rally. The BSE Midcap and Smallcap indices had rallied 19 percent and 17 percent, respectively, in the last two months, before getting into a sharp correction since yesterday. In two trading sessions, these indices fell 3.3 percent and 3.6 percent respectively.
"Post the sharp rally in midcaps and smallcaps, profit booking is being witnessed as the valuations for many stocks have touched unrealistic levels," said Sneha Poddar, AVP Research, Broking & Distribution, Motilal Oswal Financial Services.
"If we remove some of the very expensive names, this correction does offer bottom-up opportunities, given the COVID-related relaxations, pick-up in economic activities, buoyant festive mood and an improved demand backdrop," she said.
"The balance sheets and cash flows continue to improve as corporates tighten costs and deleverage. Going ahead, Q2FY22 earnings delivery versus earnings expectation would provide further direction to the market," Sneha added.
IRCTC is a central public sector enterprise, wholly owned by the government of India, and under the administrative control of the Ministry of Railways.Disclaimer: The views and investment tips by experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.