Paytm share price cracks 10% to hit 52-week low; analysts say avoid the stock
Paytm share price plunged 10 per cent to reach a 52-week low of ₹342.40 on BSE in intraday trade on Wednesday. Paytm share price has been witnessing acute selling pressure this month, falling as much as 55 per cent.
Paytm share price cracked 10 per cent to hit its fresh 52-week low of ₹342.40 in intraday trade on BSE on Wednesday, February 14. Paytm share price opened at ₹353.50 against the previous close of ₹380.35 and soon touched its 52-week low. Around 11:30 am, the stock traded 6.28 per cent lower at ₹356.45 on the BSE.
Paytm share price has been witnessing acute selling pressure this month, falling as much as 55 per cent, after the Reserve Bank of India (RBI) barred Paytm Payments Bank (PPBL) from conducting certain operations following a system audit report and subsequent compliance validation report of external auditors.
The RBI on January 31 directed PPBL to stop accepting deposits or top-ups in customer accounts, wallets, FASTTags and other instruments after 29 February citing large-scale non-compliance with regulations and supervisory concerns.
Moreover, RBI has ruled out a review of its decision in the case of Paytm Payments Bank.
Several brokerage firms have downgraded the stock after the RBI action. In a recent report, global brokerage firm Macquarie also downgraded the stock's rating to 'underperform' and significantly lowered its target price to ₹275 per share from an earlier target price of ₹650, citing the company's sharp reduction in revenues across various segments.
Meanwhile, the Directorate of Enforcement (ED) has been roped in to check for suspected breaches at Paytm Payments Bank on a reference from the Reserve Bank of India (RBI), Mint reported quoting two officials aware of the development. The ED, which investigates money laundering and foreign exchange-related breaches, has started a preliminary inquiry into the affairs of the company. It was yet to register an enforcement case information report as of Monday, one of the two officials cited above said.
A spokesperson for Paytm replied to a query from Mint saying the company will comply with requests for information from regulatory authorities on matters about One97 Communications Ltd and its associate, Paytm Payments Bank.
Also Read: Paytm Bank gets a knock on the door from ED
Analysts recommend avoiding fresh exposure
Technical analysts expect further weakness in the stock and recommend staying away from the stock at this juncture even if it is available at a cheap valuation.
Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers pointed out that currently, Paytm stock is trading below all major exponential averages, indicating a prevailing bearish sentiment.
Patel suggests staying away from the stock and exiting positions in case of an upward movement in the stock.
"Should there be any potential upward movement from lower levels, it may serve as an opportunity to exit positions. The daily Stochastics indicator has entered the oversold zone, suggesting a continuation of bearish momentum. Consequently, traders are advised to stay away from this counter," said Patel.
Milan Vaishnav, CMT, MSTA, Founder and Technical Analyst of Gemstone Equity Research and ChartWizard FZE said investors should strictly avoid fresh exposure in the stock.
"Given the kind of turmoil the company is in, it would be prudent not to add any more quantity even if it is available at a deep discount. While staying put with the investments and taking a steep cut would make no sense for the investors, any fresh or incremental exposure in the stock should be strictly avoided," said Vaishnav.
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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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