RVNL shares are down 18% from record high, is it time for bottom fishing?

Shares of Rail Vikas Nigam Ltd (RVNL) have fallen 18% from thir record high in two months. The multibagger stock, which hit a record high of Rs 647 on July 15, 2024 was trdaing at Rs 531 today, clocking a 18% loss during the period. In the current session, RVNL shares slipped 2.3% to Rs 530.50 on BSE. Total 4.42 lakh shares of RVNL changed hands amounting to a turnover of Rs 23.63 crore. Market cap of RVNL stood at Rs 1.11 lakh crore on BSE. RVNL shares have a one-year beta of 1.3, indicating high volatility during the period.         

In terms of technicals, the relative strength index (RSI) of RVNL stands at 41.5, signaling it's trading neither in the overbought nor in the oversold zone. Rail Vikas Nigam shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, but higher than the 100 day, 150 day and 200 day moving averages.    

HDFC Securities is bullish on the railway stock. It has given a 'buy' rating a target price of Rs 700 for two months. The stop loss for the share is Rs 555.

Abhijeet Ramachandran, independent Sebi registered analyst said,
"RVNL stock price is slightly bearish on the Daily charts with strong resistance at Rs 563. A Daily close below the support of Rs 542 could lead to a fall till Rs 513 in the near term."

Kushal Gandhi, Technical Analyst, StoxBox warned investors against bottom fishing in the stock at current level. 

"The price action of RVNL reverted back to a distribution phase following a false start on 30th August. It failed to regain its previous pivot high near Rs 627 and has since demonstrated a downward trend. With the exception of 13th September, the stock has closed in the red in the last 10 trading sessions. Presently, the price action is below the 50-day moving average, and both the daily and higher timeframe relative strength index show a negative slope, suggesting momentum waning. Consequently, we advise against attempting to engage in bottom fishing in this stock," said Gandhi. 

Antique Broking in a recent report assigned a sell call to the stock with a price target of Rs 283. The brokerage finds the stock overvalued  and said lot of opportunities are in the planning stage.

RVNL has been inking memorandum of associations (MoUs), but is awaiting order finalisations. The railway PSU's order book is dominated by nomination orders, the brokerage said. A lot of opportunities are still in the planning stage and the stock valuation (EPC business) at 62 times H1FY27 EPS is making it apprehensive about the scope of stock price appreciation from the prevailing market price.

"The stock trades at an expensive valuation of 66 times/ 59 times at its FY26E/27 EPS. We have a SELL rating and a SoTP-based target price of Rs 283. Risks to our rating are execution uptick and order wins. We have modelled in an inflow of Rs 25,000 crore per annum over FY25-27E," said Antique.

RVNL is an executing arm of Indian Railways and works for and on behalf of the ministry for projects assigned to it for execution. It works on a turnkey basis and undertakes the full cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management.