Nykaa shares again see vertical fall. What should investors do?

Shares of FSN E-Commerce Ventures, the parent of cosmetics-to-fashion retailer Nykaa, have declined significantly in the past few sessions, dropping below their initial public offering (IPO) issue price of ₹1,125, ahead of the 10 November expiry of the one-year lock-in period for its pre-IPO shareholders. 

“With pre-IPO shareholders’ lock-in set to expire on Nov 10th, 2022, it will be crucial to see if these investors liquidate or continue to hold for further gains. While Nykaa is certainly a differentiated play but the fact that 12%+ shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa. We also note that a majority of these investors did generate liquidity during the OFS and secondary sales prior to the IPO. Furthermore, 70% of the share capital that is getting unlocked belongs to patient capital such as HNIs and family offices, which might not be obliged to sell due to tenure of funds,” said JMFinancial in a note.

The brokerage house has a ‘Buy’ rating on the stock with a target price of ₹1,780 and believes that any short-term dip should be “a great accumulation opportunity for investors looking to build long-term positions in Nykaa.”

Nykaa shares got listed in November last year and the stock has declined more than 58% since its market debut. Other new age tech stocks, including Paytm, Zomato, Nykaa, PB Fintech, Delhivery, which recently went public, have also had a tough months so far on the stock market and have already fallen below their respective issue prices.

“The counter is witnessing a vertical fall after breaking down the key support of 1220. One should not catch a falling knife therefore investors should stay away from this counter. Those who already hold this counter can book out loss and look for other opportunities however if someone wants to take a risk then 920 will be a stop loss for existing positions,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart Ltd.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.