Stock Making a Comeback Amid a 70% Fall; Rebounds 23% in 3 Days!

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While the broader markets were raking up big gains in the last many sessions, Indiabulls Real Estate (NS: INRL ) clearly seemed to be outpacing the broader markets. The share price of IB Real Estate didn’t just outperform the broader market index but also outpaced the returns of the Nifty Realty index. 

In the last one month, the Nifty Realty index which constitutes 10 real estate and infrastructure developers delivered a decent gain of around 6.59%. However, IB Reall Estate which holds 4.24% weightage in the index surged by a massive 18.6%, although most of the gains came in the last three sessions alone.

IB Real Estate is a small-cap real estate developer with a market capitalization of INR 4,130 crores. The FY22 was the first loss-making year for the company (at least since 2013), posting a consolidated loss of INR 136.72 crores, compared to a profit of INR 4.31 crores in FY21. Interestingly, this massive drop in net income didn’t reflect the revenue loss at the same pace. While the revenue in FY22 fell only 7.26% to INR 1,541.37 crores, net income tanked 3,272% as EBIDTA took a higher hit, from INR 320.34 crores to INR 95.1 crores.

Despite the not-so-good year (FY22), institutional investors have ramped up their stake in the company in the last year. The DIIs went from no holding in June 2021 to 0.94% in June 2022, while FIIs increased their stake from 16.58% to 22.36% in the same period. Mutual funds, which held a 1.51% stake in June 2021 are now up to 4.77%.

Image Description: Daily chart of IB Real Estate with volume bars at the bottom

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Coming to the charts, the bad FY22 was probably one of the main reasons that IB Real Estate shares plunged from a 52-week high of INR 195.9, marked in November last year to a 52-week low of INR 58, marked last month. This is a massive fall of around 70.5%. 

However, now the stock is looking to recover from the bottom, after making a bullish divergence. On 6 July 2022, the stock formed a bullish divergence which is a prominent early reversal signal. After that, the stock kept on gradually moving towards the north as selling pressure started to ease. In the last three sessions, IB Real Estate shares witnessed a surge in demand leading to over 23.7% gain to the day’s high of INR 83.75 today. In the midst of this 3-day rally, the stock also surpassed its hurdle of INR 80 and is now heading towards the next resistance of INR 100. Also, there has been a volume expansion seen during the ongoing rally which depicts mass participation, strengthening the current trend.

As the stock is already rising from the bottom, the downside risk seems less than the upside potential. Still, investors need to do proper due diligence before making an investment decision.

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