IRCTC shares plunge more than Rs.1000 after hitting Rs.1 Trillion Market Cap

After hitting a record high in early trades, shares of Indian Railway Catering and Tourism Corporation (IRCTC) saw a dramatic drop of 1,400 percent to close to 4,995 per share in Tuesday’s trading session. The stock ended the day at Rs. 5,363 per share, down more than 8%. IRCTC shares hit a new high of Rs. 6,393, up more than 7%, with the company’s market capitalisation topping $1 trillion in early trading.

Today’s broader markets were likewise incredibly turbulent. The Sensex fell 49 points after peaking at 62,000 in early session. In the midcap and small cap space, there was a lot of profit booking. “After the shift observed in today’s trade, investors should be cautious at these levels, particularly in midcaps and small caps counters. It is recommended that investors maintain a strong stop-loss on their positions. Railway equities were also under pressure at the end of the day after the news of the appointment of a railway regulator. IRCTC had lost 15% of its value. Today, there was a lot of profit-booking in power stocks.

The next level of support for IRCTC is at 4750-4500, from which a rebound is predicted, thus purchasing on the slide is only recommended for long-term investors.” Traders should use strict stop-losses because the stock is under profit-booking pressure and will continue to be erratic.

Head of Research & Investment said, “The market saw a dramatic sell-off after reaching new milestones, and we are witnessing the first signs of market distribution as the Nifty and Sensex both closed with little losses, but the true pain was felt in the broader market as the Nifty Midcap index lost more than 2%. IRCTC and Tata Power, which had been top performers in the previous three days, led the decline.”

“The fundamentals of IRCTC remain strong, but there is valuation concern after a steep run, and there was a clear speculative move as it was easy to make money for traders every day, so we are seeing a technical correction where the psychological level of 5000 is immediate support, but there is a risk that it may slip below this and head towards the 20-DMA, which may coincide with the 4500 level, but 4000-3800 will be a critical demand zone to take fresh buying positions.”

IRCTC joined the key markets in October 2019 and currently holds a monopoly. In the rail network, it enjoys a 100 percent market share. It’s also the only company with the authority to run catering services on trains and at major railway stops.

Since its debut in October 2019, the Indian Railways’ PSU stock has delivered spectacular returns to its stockholders. IRCTC’s stock price has increased by nearly 1,700 percent since its IPO, from 320 per share to 6,000 per stock. The multibagger stock is up roughly 245 percent so far this year, after rallying 275 percent in the previous year.

While the general picture for the counter remains optimistic, today’s fall suggests a healthy correction from present levels. The future direction of stock price movement will be determined by the wider market’s direction. If the pre-Diwali surge continues, the counter might continue to rise from here, with immediate support at 4750.