F&O Stock Hits ‘15% Lower Circuit’; Investors got Trapped!

  • Stock Market Analysis

The Indian markets opened the session with a decent gap-up on Tuesday, as reflected by the SGX Nifty . While there has been a positive sectoral breadth seen in the market with only 2 out of the 11 sectoral indices trading in the red zone, one stock is making investors run for a cover.

With the Nifty Financial Services index gaining 0.74% to 18,187, by 9:36 AM IST, one of its constituents is giving a nightmare to investors. The company is Muthoot Finance (NS: MUTT ), the shares of which tanked by a massive 15% to INR 1,009.3, crossing the first circuit filter of 10% and now locked in at the 15% limit for the day. 

Image Description: Daily chart of Muthoot Finance

Image Source: Investing.com

Muthoot Finance shares have been tanking on the back of a dramatic surge in the volume figures, depicting investors’ urgency to make an exit. The volume for a few minutes of the day so far has already crossed a massive 2.37 million shares, which is the highest volume since 27 May 2022. Despite such a massive quantity of shares being liquidated from investors’ portfolios, the supply of stock is still outpacing its demand. 

The trigger for a selling spree in shares of Muthoot Finance is the company’s lower-than-expected Q1 FY23 results. Revenue for the reported quarter fell 7.79% to INR 2,804.32 crores, while net profit fell 17.83% to 819.23 crores, compared to the previous quarter. The net profit is the lowest in the last many quarters, while profit margins also tanked from 35.63% to 31.96% QoQ. In fact, the net interest margins (NIMs) also fell by 150 basis points QoQ, while on a YoY basis, NIMs fell by a noticeable 231 basis points. So all in all, there was a bad performance by the company on almost every front.

So where the stock is now heading? 

The massive meltdown in the company's shares has completely negated an attempt at recovery that we were seeing for the last few sessions after the stock hit a 52-week low of INR 960.4 in June 2022. From there, the stock had shown a decent recovery to the last swing high of INR 1,213.95 in the last session. This entire recovery which took approximately 1.5 months, has now gone for a toss over a single day’s fall.  

The worsening sentiments might lead the stock to again test its 52-week low, which is less than 5% away from the CMP of INR 1,009.3. However, there might be a dead-cat bounce that could be seen before the stock heads towards the previous low. If the recent swing high of INR 1,213.95 gets taken out before the previous low, then the stock could continue its recovery. 

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  • Indranil Ganguly @Indranil Ganguly
    I exited it when it was 1437 , 😀knew its going to breakdown sooner and longer , as company has weak financial condition.
    Like 1
  • Indranil Ganguly @Indranil Ganguly
    This is a falling comet , donot enter now, until unless it stabilizes itself well strong enough on 50 SMA
    Like 0
  • chuky eightfourseven @chuky eightfourseven
    already Quit it before Tank. so happy 😊
    Like 1
  • AV CARE FOR YOUR MONEY @AV CARE FOR YOUR MONEY
    it called by Demand Zone.
    Like 0
  • Should buy below 1000 in stager manner..
    Like 0
    • Jonas Britto @Jonas Britto
      no this stock is going to 80-90 soon
      Like 0
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  • JAYESH VORA @JAYESH VORA
    Thanks for information and updates
    Like 0
  • Anil Mohapatra @Anil Mohapatra
    Thanks Aayush
    Like 0

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