2 Overvalued Breakdown Shares that Nosedived Today!

  • Stock Market Analysis

The broader market sell-off in today’s session was witnessed after a decent time. The last time Nifty 50 fell over 1% was on 23 January 2024 and today with a cut of 1.11% and a sea of red numbers across sectors, many stocks witnessed breakdowns. Here’s a list of 2 such stocks.

Bajaj Auto Limited

Bajaj Auto Ltd (NS: BAJA ) is a two-wheeler manufacturer in India with a market capitalization of INR 2,39,669 crore and trades at an expensive P/B ratio of 8.16 which is also pointed out by InvestingPro+’s ProTips. The stock is already overvalued with its fair value being INR 6,675 compared to the CMP of INR 8,188, depicting an 18% downside potential.

Image Description: Daily chart of Bajaj Auto with volume bars at the bottom

Image Source: Investing.com

Image Source: InvestingPro+

On top of that, today the stock fell 3.25% and fell below its short-term support of INR 8,200, and that too on a closing basis. This fall from the top end of the rally signifies a serious dent in investors’ sentiment and therefore upside from here could be limited. On the charts, there is some support around INR 7,400 and both technically and fundamentally, the stock isn’t looking good from here on.

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Mahindra & Mahindra Limited

Another one from the auto space, Mahindra & Mahindra Ltd. (NS: MAHM ) is a 4-wheeler manufacturer with a market capitalization of INR 2,33,557 crore and trades at a P/B ratio of 3.48. Just like Bajaj Auto, this stock is also overvalued and its fair value of INR 1,500, compared to the CMP of INR 1,901, depicting a 21% downside.

Image Description: Daily chart of M&M with volume bars at the bottom

Image Source: Investing.com

Image Source: InvestingPro+

Today, it has made a bearish engulfing candlestick pattern on the daily time frame which is a trend reversal signal and signifies the end of the ongoing uptrend. There is very strong support around INR 1,750, but that is also an 8% cut from here. The entire auto space is also looking weak and traders need to be cautious with these counters.

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X (formerly, Twitter) - aayushxkhanna

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  • Utsav Rughani @Utsav Rughani
    I absolutely agree with home Large cap share never Runs like M&M running, it'll give correction of 200-300 Rupees from current levels ✅
    Like 0
  • Sudipto Roy @Sudipto Roy
    Bajaj has a buy back offer at Rs 10,000. Record date is on 29th which is also monthly settlement date. Of course some reaction would happen.
    Like 0
  • Amiya Raut @Amiya Raut
    Should auto companies be valued on the basis of P/B ratio ?
    Like 0
  • Sarvesh Rao @Sarvesh Rao
    Thank you for this valuable insight. Please do provide some stocks that can be bought amidst sell off
    Like 0
  • SHANTHI KUMAR @SHANTHI KUMAR
    view on force motor sir
    Like 0
  • vijay katial @vijay katial
    Awesome article.
    Like 1
    • Aayush Khanna @Aayush Khanna
      Thanks, Vijay.
      Like 0
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