IRCTC stock price down nearly 40% from life high - Check whats really driving the correction

Shares of Indian Railway Catering and Tourism Corporation continues to decline for the 5th straight session on Monday, as the stock slipped over 14 per cent to Rs 3690 per share to hit a day’s low on the BSE intraday trade. 

The counter has declined almost 40 per cent from its 52-week high of Rs 6393 per share touched on October 19, 2021.

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The stock has been reporting weakness since last week with a sharp dip on the back of heavy volumes and a piece of news related that the government is appointing a regulator for the rail sector. The counter has been the top laggard in the broader markets (mid-cap category) since October 19, 2021. 

On the contrary, the stock in the last six months gained around 130 per cent from Rs 1731 per share amid heavy buying volumes as well as the country moves towards full unlocking with a decline in COVID cases and a surging vaccination drive. 

The market expert and TradeSwift’s Director Sandeep Jain explains that even if the scrip corrects for Rs 1000-2000 per share, it won’t make much difference, according to him the stock is already over-valued as compared to other PSU listed companies on the exchanges. 

Terming the IRCTC shares are of indeed a quality, Jain mentions a new-gen business model and monopoly in train ticketing services makes it more sought out stock. However, what if the government decides to privatise or disinvest some stake in the company and competition arises within the ticketing segment, scares the analyst. 

According to TradeSwift Director, the correction in IRCTC is mainly due to heavy profit booking and the regulator/controller news in the rail sector has likely impacted the buying sentiment. 

Similarly, the technical expert Sacchitanand Uttekar believes, the price action movement is huge and an inversing kind of candle is visible on the weekly charts after a big series, which is negative. He says, the only positive thing on IRCTC charts is that it has come down to its 20-Day Weekly EMA. 

Uttekar advises the investors to avoid the stock for the next few days and urges them to wait till the counter settles, as he doesn’t see either any major incremental strength or any weakness as stock being overvalued.   

The counter closed almost 13 per cent lower to Rs 4024.65 per share on the BSE, as compared to a quarter percent rise in the S&P BSE Sensex.