Nykaa shares see another big fall today. Should you try bottom-fishing?

Market


Shares of FSN E-Commerce Ventures Ltd., owner of beauty e-retailer Nykaa, fell as much as 5% today as pre-IPO investors continue to exit the stock after the expiry of lock-ins. Stocks often fall after lock-ins expire, as investor selling puts downward pressure on shares. At day’s low, Nykaa shares were down at at 174.5, before paring some losses. At 11:30 am, the stock was down 3.5% at 177.20.

Nykaa shares had got listed last November and the mandatory lock-in period for pre-IPO investors came to an end on November 10. Apart from lock-in expiry, concerns over valuations and rising global rates have also affected some high-profile internet stocks, even as the broader Indian stock market has outperformed global peers and scaled new peaks.

Reports said that private equity player Lighthouse India will sell shares worth 335 crore in FSN E-Commerce Ventures through a block deal today.

On Friday, private equity player TPG Growth sold Nykaa shares worth 1,000 crore. These shares were acquired by various entities, including Societe Generale, HSBC Indian Equity Mother Fund and Goldman Sachs (Singapore) Pte, among others.

Expert Take: What to do with the stock?

“Nykaa is witnessing high volatility amid the exit of PE funds after the end of the one-year lock-in period. The counter is trying to find its feet in the 170-160 area but is struggling to sustain itself above the 200-mark. It must cross the 220 mark for any meaningful recovery, while if it falls below the 160 mark, the pain will continue for more downside. For the time being, new investors should avoid this counter, while existing investors can keep their stop loss at 160,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

 

Sumeet Bagadia, Executive Director at Choice Broking, said that fresh investors should avoid taking any fresh position. Technically, resistance for Nykaa is at 200 and support 160, he added.

On the other hand, Ravi Singhal, CEO at GCL Securities, says that downside in Nykaa shares seems limited as big investors of the stock have already booked profit. “High-risk traders can accumulate Nykaa shares in 170 to 150 apiece range keeping stop loss around 140. The stock may become highly bullish after sustaining above 225 levels. So, safe investors can buy Nykaa stocks above 225 levels,” he added.

Nikhil Kamath , co-founder true beacon and zerodha, feels Nykaa is a good business, but valuations do not seem favourable.   

“Across markets, investors are increasingly focusing on profitability and their multiples. Nykaa continues to be a great business run by an able management, the point at which equilibrium will be reached between value investors and speculators might still be some time away. The valuations seem to be on the higher side.” Nikhil Kamath , co-founder true beacon and zerodha.

Nykaa shares are down about 7% since November 10. According to NSE data, Lighthouse India Fund III sold 96,89,240 shares on 10th November at average price of 171 per share. Among other major sellers, Segantii India Mauritius sold 33,73,243 shares at average price of 199 on 15th November.

Meanwhile, shares of One 97 Communications Ltd., the parent of Paytm, plunged 7% today. This stock also has been under pressure since the lock-in for pre-IPO investors expired recently.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

 

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