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Indian Railway Catering and Tourism Corporation (IRCTC) has declined a massive 38 percent from its record high of 6,369, hit on October 19.

The stock had been a consistent performer, since it made its debut in October 2019, rising nearly 900 percent since listing till October 19, 2021. Just in the last 3 months, the stock surged over 100 percent on the back of a rise in ticket bookings and travel plans as the economy opened up after COVID restrictions. Further, the announcement of a stock split added to the gains. It was also listed at an over 100 percent premium at 644 against its issue price of 320.

However, since hitting its record high last week, the stock has been on a downward spiral. In today's session, it has lost over 10 percent in intra-day deals.

So what has led to this decline?

As per the analysts, the sudden decline since October 19, 2021, has been mainly on the back of valuation concerns after a steep run-up in the last few months. While the fundamentals of the stock remain strong, the skyrocketing stock price of the company led to massive profit booking.

Further, the broader markets have also been witnessing a huge correction in the last few days, further adding to IRCTC's losses.

Experts noted that the midcaps and smallcap stocks touched unrealistic levels which were not supported by their fundamentals leading to a major decline in broader markets on the back of profit booking.

Mutual funds and foreign investors also reduced their stakes in IRCTC, which is another reason for the recent decline. The mutual funds hold a 4.78 percent stake in the firm as per the September quarter data against 7.28 percent in the June quarter. Meanwhile, the FIIs stake in the firm fell to 7.8 percent in the September quarter from 8.07 percent in the June quarter.

Going ahead?

While analysts believe that the fundamentals of IRCTC are strong, they do not advise accumulating the stock at current levels. however, if you already own the stock, instead of selling due to the recent decline, holding the stock for the long term is advisable.

The expansion plans of the firm showcase further potential of an upside in the stock in the long run. The company has been expanding its business to bus, air tickets as well as tour and travel planners. This could open up a whole new potential opportunity for the firm to strengthen its position. Further, the firm is also looking to apply for a payment aggregator license from the RBI, which will not only make it easier for customers but also bring in additional revenue.

Further, the easing of the economic condition post the pandemic and more people willing to travel will continue to be a positive for the firm.

IRCTC is the only entity authorized by the Indian Railways to provide catering services to railways, online railway tickets, and packaged drinking water at railway stations and trains in India. It has a dominant position in online rail bookings and packaged drinking water with around 73 percent and 45 percent market share, respectively.

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