Shares of Nykaa (listed as FSN E-Commerce Ventures Limited) have been under immense selling pressure over the past few trading sessions. The stock declined 6 per cent in the early trade to hit an intraday low of Rs 2,028 on the Bombay Stock Exchange (BSE). However, it recovered and gained 4 per cent to hit an intraday high of Rs 2,248.40 today.
The stock ended 1.43 per cent higher at Rs 2,183.30 against the previous close of Rs 2,152.60. Market cap of the firm rose to Rs 1,03,254.20 crore.
Ending of lock-in period
"As the lock-in period for Nykaa’s anchor investors is getting over today, a steep fall in its share price would be observed. This implies that these anchor investors would be selling their holdings to book profits," Sonam Srivastava, Founder, Wright Research told BusinessToday.in.
Should you buy, sell or hold?
Srivastava stated that the existing investors are advised to stay invested as this is a small correction. With changes in consumer behavior and Nykaa’s positioning in the market, its stock price would pick up and could rally more than 25 per cent in the upcoming fiscal year.
"For investors who did not get an allotment in its bumper IPO, this is surely a good time to consider buying into India’s leading content-led beauty, personal care and fashion brand as the price to enter seems lucrative," she added.
However, she noted that the stock has been trading on a lower note for five straight days. This is because of a substantial fall in its net profit and rising expenses in its former quarterly result.
According to Manoj Dalmia, Founder and Director-Proficient Equities Limited, lock-in is usually kept to prevent excessive selling in the stock and the ending doesn’t necessarily mean anchor investors will exit.
He stated that one may enter the stock at dips and accumulate around Rs 1,990-2,000 levels. The stock could touch Rs 3,539 levels if the closing is above Rs 2,400.
"After a robust listing, Nykaa share price is witnessing profit booking. In this scenario, when the overall market is highly volatile, investors are preferring short-term gain and covering their position to lock the profits," Dr. Ravi Singh, Vice President & Head of Research, ShareIndia told BusinessToday.in.
"Technically, the stock may see some weakness towards Rs 1,800 levels in the near term. On the daily chart, most of the momentum indicators like RSI, MACD, William and MAs are indicating downside move. Nykaa may show some recovery at lower levels," he added.
FSN E-Commerce Ventures Ltd, which operates online beauty e-commerce platform Nykaa, on Sunday reported over 95 per cent year-on-year (YoY) decline in consolidated net profit at Rs 1.2 crore for the July-September quarter as its expenses shot up. It had posted a profit of Rs 27 crore in the year-ago period.
The company's revenue from operations rose 47 per cent year-on-year (YoY) to Rs 885.3 crore from Rs 603.8 crore in the corresponding quarter of last year.
The initial public offering (IPO) of Nykaa's parent FSN E-Commerce Ventures Ltd was subscribed more than 82 times at the end of the final day of bidding on November 1. The firm raised Rs 2,396 crore from anchor investors on October 27.
Shares of Nykaa listed at a premium of 79 per cent to the issue price, marking a strong listing for the online beauty retailer. The company made its market debut at Rs 2,001 per share on the BSE against the IPO issue price of Rs 1,125.
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