Accident of the Day: F&O Stock Tanks 9% & Fall has ‘Just Started’!

  • Stock Market Analysis

While there hasn’t been much weakness in the broader markets, with the benchmark Nifty 50 index falling 0.3% to 17,605, by 9:31 AM IST, many sectors are underperforming the overall markets today. One such sector is the Nifty Pharma index which is down 1.15% to 12,864. A major drag in the index is coming from a massive fall of Ipca Laboratories Ltd. (NS: IPCA ) shares which have fallen 9.5% to the day’s low of INR 919.4. The stock holds roughly 2.99% weightage in the Pharma index, translating into around a 0.28% fall in the index alone.   

IPCA Laboratories is a pharmaceutical company and has a portfolio of around 10 active pharmaceutical ingredients (APIs) which it manufactures and sells. With a market capitalization of INR 25,254 crores (pre-fall), the share price of the company trades at a P/E of 28.45, compared to the industry average of 38.37. 

Image Description: Daily chart of IPCA Laboratories

Image Source: Investing.com

The share price of IPCA Laboratories was torpedoed from the opening tick on the back of a massive volume of 865K shares on the NSE in the first few minutes of trading, which has already surpassed the highest one-day volume in over 2 months. 

Investors seem disgruntled by the company’s Q1 FY23 results which came out yesterday. It reported a QoQ jump of 23.34% in consolidated revenue to INR 1,607.85 crores, however, the net profit soared only 9.85% on a QoQ basis to INR 143.06 crores due to increased pressure on margins. When comparing on a YoY basis, net profit plunged over 52.5% which is a real disappointment. 

A massive fall of around 10% might seem a lucrative buying opportunity, however, the daily chart seems to be painting a bearish picture. The breakdown has sliced through the nearest support of INR 960 with ease. Now there is no visible support on the chart till the nearest level of INR 880 (spot). This is a level wherein buyers might be expected to kick in to capitalize on the dip but till this level, there could be some pressure exerted by the bears. 

Looking at the broader picture, the trend is clearly negative as the stock had been following a formation of lower lows and lower highs since it started falling from its all-time high of INR 1,383.1, marked on 15 September last year. Unless the formation reverses and changes to a higher high and higher low, the broader trend should be deemed to be negative. The first signal of this reversal would come when the stock breaks above the recent swing high of INR 1,034, preferably without breaking the current 52-week low of INR 831.05, marked in June 2022.  

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