Bottom Reversal: Is it Right Time to Take Delivery of Delhivery?

  • Stock Market Analysis
  • Editors Pick

The IPO of Delhivery (NS: DELH ) has given severe pain to investors since its listing. The company marked its debut on the Indian bourses on 24 May 2022 and since then has only been heading toward the south. The majority of the losses came in October 2022, when the stock nosedived a whopping 40.95% and despite getting oversold, the trend remained in the favor of the bears.

The company is in the business of providing logistics and supply-chain-based services and is left with a market capitalization of INR 22,300 crores. Its loss-making operations have been one of the reasons for a consistent decline in market capitalization. But it seems like FIIs aren’t much bothered and in fact, have increased their stake from 8.02% in September 2022 to 9.2% by December 2022. The same story continues on the mutual fund side, as they have ramped up their interest from 6.95% to 11.12% in the same period. 

Image Description: Daily chart of Delhivery with the RSI & MFI at the bottom

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The price at which Delhivery shares are available is probably making this stock a better proposition now, as compared to a few months back. Last week, the stock hit an all-time low of INR 299.55, indicating a noticeable value erosion of around 39%, from the listing price of INR 495.2. 

The RSI (daily, 14) indicator which depicts the momentum of the stock along with the oversold/overbought levels has long been indicating the oversold status of the stock but now there are multiple developments taking place on the daily chart that is making it a good risk-to-reward opportunity for the bulls.

Firstly, the stock is reversing from the bottom after making a bullish divergence on the daily chart., which is a very healthy indicator of a trend reversal, toward the upside. Apart from this momentum divergence, a volume divergence is also present at the bottom (can be seen via the MFI) which is further strengthening the probability of a reversal.

Today’s 6.6% rally to INR 326.45, by 12:58 PM IST, helped the stock to break above short-term falling trendline resistance, the final indication of the start of an up move. The trend still seems to be down on a larger time frame, but a bounce back from here might be on the cards. A rally to the previous peak of INR 339 seems achievable and the next hurdle of INR 380 is also not a big task for the stock.

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