Nykaa Slips From INR 200 Level Amid Global Stock Market Slump; But What Does The Market Sentiment Say?

After hitting a fresh 52-week high at INR 204.35 during the previous week’s last trading session, shares of beauty and fashion ecommerce major Nykaa reversed its uptrend and slumped as much as 8.1% to INR 183.65 in early trading today (August 5).

It is pertinent to note that Nykaa shares crossed the INR 200 level last week for the first time since November of 2022, the year it made the stock market debut (adjusted for stock split).

The stock’s high trading volume last week likely suggested an improved optimism around it among public market investors. However, it is to be noted that the decline in Nykaa’s share price today came amid a significant sell-off in the broader global and domestic markets.

Commenting on Nykaa’s recent share performance, Rupak De, senior technical analyst at LKP Securities, said, “Nykaa is under pressure on Monday amid a global sell-off. However, the stock has shown a strong breakout on the weekly timeframe, suggesting a rise in optimism around the stock.” 

“The sentiment might remain positive as long as it stays above INR 182 on a closing basis. On the higher end, the stock might move toward INR 200 once again in the short term,” said De, adding that above INR 200, Nykaa shares might move towards INR 220.

Besides Nykaa, all other Indian new-age tech stocks fell today. Paytm was down 7% intraday around 1 PM IST, Zomato and Mamaearth fell about 2%, Nazara declined over 6%, and Yatra was down 5% around the same time.

Around 1 PM IST today, benchmark indices Sensex was down 3.15% at 78,429.98 and Nifty50 fell 3.2% to 23,925.70 amid geopolitical tensions and fear of recession in the US.

Meanwhile, after the 8% decline, shares of Nykaa regained some momentum and were trading 3.1% lower at INR 193.5 on the BSE by 2.40 PM IST.

Changes In Nykaa’s Stakeholding In Q1

After witnessing a decline earlier this year, shares of Nykaa started gaining momentum from April. In the June quarter itself, the stock gained about 9%.

During this quarter, mutual funds increased their stakeholding in the company to 13.29% from 12.32% in the preceding March quarter.

The number of mutual fund schemes holding stakes also increased to 25 in the June quarter from 22 earlier.

The stock continues to see growing traction from mutual funds. Recently in July, ICICI Prudential Mutual Fund via two of its funds bought INR 256.4 Cr worth of shares in Nykaa via block deals.

On the other hand, despite a significant sell-off by foreign institutional investors (FIIs) in the Indian equity market in April and May amid the country’s election uncertainties, Nykaa managed to see a marginal increase in traction from the foreign portfolio investors (FPIs).

The FPIs’ shareholding in the startup increased to 10.48% in the June quarter from 10.32% in the March quarter. It is pertinent to note in this regard that Societe Generale bought some stake in Nykaa worth about INR 151 Cr in a block deal in April.

Meanwhile, the insurance companies’ total stakeholding in Nykaa increased to 4.75% in the last quarter from 4.56% in the March quarter even as the total number of invested insurance companies declined to six from nine earlier.

However, the total stakeholding of the promoters declined marginally by 0.02% to 52.20% in the June quarter even as the total number of shares held by this group remained unchanged at 149.13 Cr shares.

While Nykaa is yet to announce its June quarter earnings, the Falguni Nayar-led company projected a strong revenue growth of around 22-23% year-on-year in the quarter.

During an investors’ meeting in June, Nykaa also projected its beauty business to grow at a compounded annual growth rate (CAGR) of mid-to-late 20% till FY28 and fashion vertical to grow to 2.5-3X over the next three years. 

Following that, some brokerages increased their ratings on Nykaa while several of them increased their price targets.

Currently, 14 out of the 23 analysts covering Nykaa have a ‘buy’ or higher rating, with an average price target of INR 192.87.

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