TC Markets: IRCTC big fall (18%) – What should an investor do- Buy or sell or hold?

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Lately, benchmark indices have been in red for a couple of days. Some of the stocks which have been on a bull run are seeing heavy selloff. Indian Railway Catering and Tourism Corporation i.e., IRCTC is one of them. The stock has been correcting as there is no tomorrow. What is the reason? Is it a time to sell our holdings or to average or to enter? Let us discuss.

After hitting a high at Rs.6393 per share on Tuesday morning the stock plunged to Rs.5363 on BSE by the evening. Today it is falling further. Actually, it entered the F&O ban from Wednesday i.e., 20th October, 2021. The market already had the knowledge. However, investors bought it in a crazy manner, making the stock price to soar nearly Rs.6500. But now, it seems like the profit-booking has started. The extreme fall indicates that maybe some big investors like FIIs or DIIs have been booking profits.

IRCTC has been enjoying a monopoly in its industry. It will foray into cruise ships too very soon. The stock will undergo a share split by the end of this month. It is a debt-free stock which is another good cause. These reasons made this stock from dear to dearest. In a couple of weeks, the stock ran from 3500 level to almost 6500. As per experts, it cannot sustain above 6000 levels. In the time of correction, their prediction based on charts looks coming true. However, they said it has a support from 5000 to 5100 zone. These can be justified as per technical analysis.

The stock’s PE (Price Earning Multiple) 243. Market PE is 31. It clearly shows that this stock is very expensive. Generally, we compare a stock’s PE with the respective industry PE. But because it enjoys a monopoly, we can’t have an industry PE which makes it difficult to compare before buying. However, a stock’s PE will start decreasing when the earnings show growth. Then what a retail investor should do right now?

A retail investor has to observe these developments carefully before entering into an expensive stock like IRCTC. Some of them might have entered at yesterday’s higher levels. They might have seen losses on their initial day of investment. This is going to happen whenever we buy a stock at its lifetime’s high. But most of us, still buy the stock in an anticipation that the stock would rally further making it more unreachable. In such a situation, instead of putting our entire money on an expensive crazy stock especially when it is trading its life-time or 52-week high, buying in small lots will help. Because even if the stock starts falling due to profit-booking, we can average by buying more and reducing per share cost.

Not only this stock, but stocks like Deepak Nitrite, Tata Chemicals, Tata Power, Nelco and IEX are some examples which are also correcting right now. These stocks have seen good rise in their respective market price in last two weeks. Some of them have faced the pressure ahead of results. And some of them are reacting to their results. Sometimes, market gives premium even before the results are declared. In such a case, the stock will correct regardless of its good results. But all of these stocks have strong fundamentals.

In a nutshell, whenever we buy a stock, proper due diligence is must. And moreover, emotional stability is need of the hour during a falling market.

Jandhyala

Editor, Tax Concept. I have written on market, finance, management, and technology.

    One thought on “TC Markets: IRCTC big fall (18%) – What should an investor do- Buy or sell or hold?

    1. In the 1st week of Oct have told in my whatsapp group is as follow : –

      IRCTC CMP is 3800 till 19th or 20th oct IRCTC will go above 6500 after that will fall.
      So Everyone is Requested ke 19th Oct tak Profit Kama ke exit kar Lena Uske baad Stock Volatile hone wale hai like roz Upper Circuit or Lower Circuit
      lagainge so be Carefull and dont Make loss in EMOTIONS

      Stay Safe and Earn good Profits

      My Prediction and Analysis is Perfect

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