Zomato shares fell 5 per cent to Rs 120.60 apiece on BSE in intraday on Tuesday, following a 9 per cent crash in the previous session. The stock has been reeling under pressure as the lock-in period for anchor investors has ended. Analysts say that the end of the one-month lock-in period for anchor investors along with problems in the US operations have led to a meaningful correction in Zomato shares. “The lock-in period for anchor investors ended on Monday, so some profit booking was seen and also considering the current sell-off in broader markets, the stock corrected 15 per cent in two days. However, there is no change in fundamentals and long-term investors are advised to maintain their position with stoploss of Rs 105,” Rahul Sharma, Co-Founder, Equity99, said.
Zomato’s IPO paved the way for a new era as the company gained huge value on listing due to its unique business model, being the first of its kind listed company. It also attracted humongous anchor books. “Although the company is loss-making it is enjoying good valuations considering future prospects,” Sharma added.
Zomato shares were still 6 per cent up from a 52-week low, touched on 23 July, while shares have come off nearly 20 per cent from all-time high level. Analysts say that Rs 120 is an important level. “Technically, Zomato shares look weak on the charts and a daily close below 120 could trigger a further correction till Rs 104 in the near term. While 131 will be strong resistance,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online.
In the traded volume terms, 12 lakh shares have exchanged hands on BSE, and 2.78 crore units traded on NSE, so far in the day. Recovering from day’s low, Zomato shares were trading at Rs 123.95, down 2.40 per cent around 11 AM. ICICI Securities, in its recent report, termed Zomato as a value stock. Initiating the coverage of Zomato, the domestic brokerage and research firm said that the food-tech giant could scale as much as 70 per cent from current levels.
Astha Jain, Senior Research Analyst, Hem Securities, expects further selling before forming base at around Rs 110-115 level. “Long term investors may continue to hold as we expect that with the company consistently gained market share over the last four years to become the category leader in the food delivery space in India in terms of GOV, going forward , funds deployment towards customer and user acquisition & retention expanding delivery and technology infrastructure will increase the growth prospects of the company,” Jain added.
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