Sonata Software shares delivered 469% returns in three years; what should investors do?

Shares of multibagger Sonata Software Ltd have delivered 469% returns in three years. The IT stock, which closed at Rs 133 on December 11, 2020 rose to Rs 756.70 on December 12, 2023 (Tuesday), clocking 468.94% returns during the period. The benchmark BSE 500 index zoomed 51.85% in the last three years. The IT stock has climbed 155.29% this year and gained 154.85% in a year. Sonata Software shares rose to an intraday high of Rs 756.70 against the previous close of Rs 704.75 on Monday. Total 0.29 lakh shares of the firm changed hands amounting to a turnover of Rs 2.10 crore on BSE. Market cap of the firm climbed to Rs 20,555 crore on BSE.  

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The company has announced a bonus issue of shares in the ratio of 1:1. The IT firm has turned ex-bonus from December 12. The bonus issue of equity shares will be subject to approval by the shareholders.  The multibagger IT stock fell to a 52-week low of Rs 261.03 on December 19, 2022.

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher said, "The stock has witnessed a decent rally in recent times and with a short correction has once again picked up for the second round of momentum forming a higher bottom pattern on the daily chart with strength indicated. With the support maintained near Rs 700 zone, one can anticipate further targets of Rs 775-785 levels in the coming days with indicators also supporting the view." 

Abhijeet from Tips2trades said, "Sonata Software looks bearish & extremely overbought on the Daily charts with strong resistance now at 745.5. Investors should book profits at current levels as a Daily close below support of Rs 700 could lead to a target of Rs 625.5 in the near term." 

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In terms of technicals, the relative strength index (RSI) of the stock stands at 63.1, signaling it's trading neither in the overbought nor in the oversold zone. Sonata Software stock is trading higher than the 10 day, 20 day, 50 day, 100 day and 200 day moving averages.   

The IT firm reported a 10% year-on-year (YoY) rise in net profit at Rs 124.2 crore in Q2 against a profit of Rs 112.7 crore. Revenue climbed 28% to Rs 1,912.6 crore in Q2 from Rs 1,496.0 crore in the corresponding period of the preceding fiscal.  

EBITDA rose 33% to Rs 220.5 crore in the second quarter against Rs 165.7 crore in the corresponding period of the previous fiscal. EBITDA is earnings before interest, tax, depreciation, and amortisation. 

Sonata Software specialises in cloud and data modernisation, Microsoft Dynamics Modernization, digital contact center setup and management, managed cloud services and digital transformation services.

Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as an investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions. 

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