Paytm: Is Accumulation Phase Finally Over?

  • Stock Market Analysis

One of the most talked-about IPOs in recent times is Paytm (NS: PAYT ). Shares of Paytm had delivered a massive loss to investors after their listing in November last year. From the highs of INR 1,955, the stock had tanked to a low of INR 510.05, that’s a massive capital erosion of around 73.9%!

However, now it seems like the stock is ready to change its trend from downwards to upwards. After a consistent decline, which saw a massive liquidation of shares from investors’ portfolios, Paytm shares have started to move in a sideways trend. This neutral trend has already negated the prior downtrend which is generally a healthier sign for a stock as compared to a sharp reversal.

This sideways trend can also be noted as a long accumulation phase where value investors start to get in to get hold of the security at relatively cheaper prices. This increase in demand is the primary reason that the stock has stopped falling further as demand has started to outstrip supply and therefore Paytm share price has been moving sideways since mid-March 2022. 

Image Description: Daily chart of Paytm Shares showing transitions between different market cycles

Image Source: Investing.com

Why is it a healthier sign than an immediate reversal? All the accumulation that takes place during this phase of the stock helps it to form a strong base which further helps it to stage a much more reliable reversal. This is a picture-perfect cycle of the stock market where a stock falls as supply overpowers demand, then it creates a base as demand starts to match supply and finally a reversal takes place as demand starts to overpower supply. These cycles generally last for a long time and therefore it takes more time to transition between different cycles.

Currently, the stock is trading around the resistance level of INR 710 - INR 715. A breakout above this resistance should be watched carefully with the volume figures. Any breakout accompanied by high volume improves the credibility of the impending move. Yesterday, the stock clocked a high volume of over 1.23 million shares which is the highest one-day volume for the month so far, further indicating the urgency of buyers to make a quick move.

One thing to be noted is that the stock has fallen consistently since its listing, therefore once it starts to recover, weak hands would try to exit their positions as they keep on getting their buy prices which creates a decent overhead supply. Therefore, a one-sided rally after the breakout should not be expected. Above the current resistance, the hurdle for the stock is seen at around INR 880.

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100
  • Sumit Chauhan @Sumit Chauhan
    1200-1220
    Like 1
  • Alexander Thomas @Alexander Thomas
    good. after one year what will be the price
    Like 0
  • Alexander Thomas @Alexander Thomas
    good. after one year what will be the price
    Like 0
  • Alexander Thomas @Alexander Thomas
    good. after one year what will be the price
    Like 0
  • kca chand @kca chand
    Thoughtful
    Like 0

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