3 Stocks To Watch Which Are Down by at least 30% from 52 Weeks High

The stock of Naukri.com (Info Edge) has fallen from the levels of Rs. 7,500 to around Rs. 5,000 amounting to correction of nearly 39%. While Indraprastha Gas Limited (IGL) and Zomato stock prices have also gone down to their 52-week low levels amounting to a fall of over 30% and 45% respectively from its 52-week high levels. What are the possible reasons behind the fall in the stock price of IGL, Zomato, and Info Edge, let’s discuss this in detail in this article as we move ahead.

Why Info Edge Stock is Falling?

• Info Edge stock closed at around Rs. 4,502 on Monday 24^th January 2022 which was down by over 39% from its 52-week high levels of Rs. 7,463.
• Before discussing the possible reasons behind the fall in the stock price of Info Edge, first, let’s briefly go through the factors which led the stock price to skyrocket.
• Info Edge, an Internet Company is well known for investing in Start-Ups and it also owns a few Cash-Cow businesses like Naukri.Com, etc. The company follows the strategy of investing in new startups from the retained earnings from its Cash cow businesses.
• In the last 1-1.5 years, two startups backed by InfoEdge- Zomato and PB Fintech (PolicyBazaar) were listed and have also yielded blockbuster listing gain to the investors.
• Info Edge was holding around 18% stake in each of these startups or more than the promoter’s stake and hence rally in these stocks helped the Info Edge stock to participate in this rally too.
• Now as we came to know about the reasons behind the rally in the stock price of Info Edge, let’s talk about some of the possible reasons behind its current downtrend journey.
• One of the major reasons behind the fall in Info Edge stock price could be the Fall in Valuations of the New Edge Technology business. Due to high liquidity in the country in the last 18 months, a huge amount of money went into IPOs which also led to the successful listing of the IPOs. Zomato stock has witnessed a fall of around 40% in its stock price from its all-time high levels of Rs. 169. A similar kind of story is happening with PB Fintech stock, which has also reported a fall of around 43% from its all-time high levels.
• Zomato and PB Fintech both are large companies having a market cap of around Rs. 40,000 Cr. and Rs. 80,000 Cr. respectively. The stake of Info Edge in both the companies is also quite high which is around Rs. 6,000 Cr. in PB Fintech and Rs. 16,000 Cr. in Zomato.
• From a core business viewpoint i.e., the business of Naukri.com, there are no such issues for Info Edge, but a fall in the valuation of invested and listed startups has been affecting the stock price of Info Edge.

Why IGL Stock is Falling?

• IGL stock closed at around Rs. 396 on Monday 24^th January 2022 which was down by over 34% from its 52-week high levels of Rs. 604.
• IGL manages the distribution and supply of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in Delhi, NCR, and other locations as well.
• Now, the Government of Delhi has announced that the new vehicles in the public transport system and the aggregators like Ola, Uber, delivery players like Zomato, Swiggy, etc. also need to have Electric Vehicle in their fleet.
• The government has notified the draft of the ‘Aggregators Policy’ to mandate EV fleets for ride aggregators and delivery services. Further, as per the notifications, at least 10% of their new two-wheelers and 5% of four-wheelers in the next three months must be electric. Further, this would be scaled up to 50% of all new two-wheelers and 25% of new four-wheelers by March 2023. This measure is focused on the adoption of EVs to combat air pollution in Delhi
• The CNG component of the IGL business contributes around 30%-40% to the total business Aggregators. And with the expectation of possible change in this space or adoption of EV can harm the business of the company to a larger extent.
• Also due to higher dependency on specific regions of the company, the stock price seems to be affected.
• The rise in input cost of CNG & PNG has resulted in the contraction of margins of the company. Whereas, the Oil Marketing Companies (OMCs) are asking for a hike in commissions on IGL’s sales. IGL uses Petrol pumps of OMCs for distribution.

Why Zomato Stock is Falling?

• The stock of Zomato has gone down from the 52 Week high levels of Rs. 169 to the double-digit figure of Rs. 91 on Monday 24^th January 2022 amounting to a fall of over 45%.
• The Zomato stock was issued at an upper price band of around Rs. 76 and had yielded a successful listing gain of around 35% and was listed at Rs. 114. Then the stock has shown a significant rally and marked 52-week high levels of Rs. 169.
• The major reason behind this significant rally in the stock price was tremendous liquidity in the market via quantitative easing by the central bank of the country. Due to high liquidity, there was a huge inflow of funds in the stock market as well as high investments in new-edge technology businesses like Zomato, and others.
• Now with the emerging scenario of quantitative easing tapering and rising yields, the liquidity is turning a bit dry and hence such stocks and the market as well might face some correction after such unprecedented inflation.
• New Edge Technologies businesses are currently focused on customer acquisitions and hence one should not expect any profit-making motive from such business in the near time.
• Currently, there are continuous outflows by Foreign Institutional Investors from the market and hence loss-making businesses like Zomato are witnessing some major corrections hardly.

What Should Shareholders Do?

In the first case of Info Edge stock, the developing scenario of the liquidity situation where there is a rise in yields, tapering of liquidity, and others could have some effect on the liquidity. Hence there could be a possible debate around premium or overvaluations of the new edge technology businesses. While in the case of IGL, the company is pressurized by business and margins pressure, and hence the stock is corrected highly. But, the overall natural gas sector stills seems to be very lucrative. Do follow due diligence before making any investment decisions.

Originally Published On: https://blog.investyadnya.in/3-stocks-to-watch-which-are-down-by-at-least-30-from-52-weeks-high/