Shares of One 97 Communications Ltd (Paytm) tumbled more than a per cent to settle around sub-Rs 400 levels on Wednesday. The stock was hit hard amid the news of resignation of Surinder Chawla, CEO and MD of Paytm Payments Bank on account of personal reasons and to explore better career prospects.
The stock has been marred lately on the back of negative news flow, regulatory actions and corporate governance issues. Despite the sharp wealth erosion, investors, both individuals and institutions, have been increasing stake in the fintech player, leaving others baffled if they should catch the 'falling knife'.
Market participants suggest that investors should assess their risk profile on a standalone basis and only investors with a high risk appetite should try to bet on it. However, both technical and fundamental analysts suggest investors to avoid Paytm at current juncture. They believe that the stock may be headed for more downside, while the upside is capped for the counter.
VLA Ambala, Founder at Stock Market Today said that Paytm is looking to be oversold in all major time frames. Its current RSI suggests- 28 at monthly, 34 at weekly and 44 at daily time frame.. Price is still carrying bearish sentiment as its trading at 200 and 20 days EMAs. It has formed a very bearish chart pattern 'bearish pennant' at monthly time frame.
"Only high risk appetite investors should try to buy Paytm above Rs 410 range and follow strict stop loss at Rs 340. Targets longer run can be put for Rs 500 to 600 but one should keep a limited exposure only considering the volatility in the counter," she said.
Ambala suggested that investors with low risk appetite should avoid the bet on Paytm citing all the regulatory concerns. "The company is going through its most tough time and it's never been performing 'Horse' and thus not looking attractive to me as of now, she added.
FPI shareholding in Paytm rose by 2.49 per cent to 20.19 per cent in March 2024 quarter, while Foreign Direct Investment (FDI) shareholding in Paytm dropped to 60 per cent from 66 per cent in the quarter. DII's stake increased to 6.86 per cent, while retail investors' shareholding also went up to 14.53 per cent sequentially.
A host of prominent overseas funds including Tiger Pacific Master Fund, Goldman Sachs (Singapore), Government Pension Fund Global, Societe Generale and Morgan Stanley Asia (Singapore) own atleast 1 per cent stake in the company. Domestic funds like Nippon Mutual Fund and Mirae Asset Mutual also upper their stake in the company for the three-month ending March 31, 2024.
The shares of One 97 Communications (Paytm) are struggling to overcome the key hurdle of the 50-daily moving average, implying weakness around the corner, said Avdhut Bagkar, Derivatives & Technical Analyst at StoxBox
"To breakout on the upside, a pivotal close over the Rs 422-mark, its 50-DMA, would signal a rally to Rs 500 levels. Until then, the price may retest the immediate support of Rs 360 levels, as per the daily chart. The strength indicator, Relative Strength Index (RSI) is trading sideways, revealing balanced momentum," he said.
During the March 2024 quarter, shares of Paytm tumbled more than 37 per cent, while the stock is down 40 per cent in the last one year. In the last six months, the stock has declined about 60 per cent, while it is still down 81 per cent from its IPO price of Rs 2,150 apiece.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, also emphasized that Paytm is suitable only for investors with a high risk appetite, cautioning those with a lower tolerance for risk to steer clear. The stock has been facing considerable pressure due to negative news, which has cast doubt on the company's future prospects.
Bathini advised waiting for the financial performance report of the company for the March 2024 quarter and the first quarter of the new fiscal year before making any decisions regarding the stock. He highlighted that the financial results and the transition to nodal banking will be pivotal factors influencing the stock's trajectory in the upcoming months.