CDSL shares fall after eight-day rally, analysts turn cautious; here's why

Shares of Central Depository Services (India) Ltd (CDSL) fell today after eight straight sessions of gains. The stock ended 1.02% lower at Rs 1523 on Monday against the previous close of Rs 1538.65 on NSE. In eight sessions preceding to the current one, the stock rose 13.59% on NSE. The scrip is not listed on BSE. 

In the current session, market cap of CDSL fell to Rs 31,830 crore. 

The CDSL stock has risen 141.36% from its 52 week low of Rs 631. The CDSL stock scaled a record high of Rs 1664.40 on August 23. 

In six months, the stock has risen 70% and gained 67.51% this year. Total 29.94 lakh shares of the firm changed hands amounting to a turnover of Rs 458.78 crore. The stock has a beta of 0.9, indicating low volatility in a year. 

In terms of technicals, the relative strength index (RSI) of CDSL stands at 70.6, signaling it's trading in the overbought territory. 

Ameya Ranadive CMT CFTe, senior technical analyst, StoxBox said, "CDSL has been exhibiting notable strength both fundamentally and technically. The stock has rallied recently, driven by the appointment of Nehal Vora as CEO and a 1:1 bonus share issue, alongside a strong Q1 2024 performance, which saw an 82% rise in net profit. These factors have fueled investor optimism, pushing CDSL to a current market price of Rs 1,527. On the technical front, the stock has shown robust momentum, with the ADX indicating strength at a level of 31, confirming a strong uptrend. CDSL is trading well above key moving averages, and its Relative Strength Index (RSI) remains in overbought territory, signaling sustained bullish pressure. Based on these signals, immediate targets can be set at Rs 1,750 and Rs 1,900, provided the stock maintains its current trajectory. However, risk management is critical. A break below Rs 1,330 would negate the current bullish view, suggesting potential downside risk and warranting caution for traders."

A R Ramachandran, an independent Sebi registered analyst said, "CDSL stock price is overbought and bearish on the daily charts with strong resistance at Rs 1,568. A daily close below the support of Rs 1,475 could lead to a fall till Rs 1,348 in the near term."

Jigar S Patel, manager at Anand Rathi said, "At this point, CDSL appears to be highly overextended because it is trading significantly above all key exponential moving averages (EMAs) such as the 20, 50, 100, and 200-day EMAs. This indicates that the stock's price has surged well beyond its typical trend, suggesting that it may be due for a mean reversion, where the price could potentially pull back to align more closely with its average levels. Such a deviation makes the stock more susceptible to a correction. Therefore, investors are advised to avoid taking new long positions at the moment, as the risk of a downward correction is heightened. For those who have already bought, it’s recommended to book profit in the zone of  Rs 1,550- Rs 1,560."

CDSL reported a 82% rise in net profit for the quarter ended June 2024. Profit climbed to Rs 134.20 crore in the June 2024 quarter compared to Rs 73.57 crore profit in the corresponding quarter of the previous year. Revenue in Q1 rose 72% to Rs 257.38 crore from Rs 149.68 crore in the same quarter last year.

Central Depository Services (India) is a Depository registered with SEBI. CDSL was set up with the objective of providing convenient dependable and secure depository at affordable cost to all market participants.