CDSL Stock went down by 5% on the single-day trading session of Thursday 22nd July 2021. So, what are the reasons behind this fall in stock price, know about this in detail in this blog.
Central Depository Services (India) Limited- the only listed security depositor in India which is listed in the stock market has performed significantly well in the trailing 12 months. This stock has yielded has generated a return of 632%, 357%, 182%, and 97% in the last 2 years, 1 year, 6 months, and 3 months respectively. The Stock fell by 5% on Thursday 22nd July 2021 on NSE to Rs. 1,426.65. Despite this fall, the return of the stock in the last 1 month stands at around 47%. So, what are the reasons behind this fell on the back of such a tremendous rally in the past in this stock?
Reason for Fall in Stock Price:
- The major reason behind CDSL Stock touching the lower circuit of 5% on Thursday 22nd July 2021 is because the stock is under the list of Securities Exchange Board of India (SEBI) ASM List.
- The stock is under the Additional Surveillance Measure (ASM)- Stage-IV List as of 22nd July 2021.
- The stock performance in the past period has bound SEBI to take some cautious steps and hence the stock is on the list of ASM-Stage (IV).
- The Additional Surveillance Measure (ASM) is a part of initiatives by the Securities and Exchange Board of India (SEBI) and the stock exchanges to ensure and enhance market integrity and safeguard the interest of investors.
- ASM on securities is for those surveillance concerns which are associated with price variation, volatility, etc.
- With this step, SEBI and the stock exchanges aim to make investors cautious while dealing with those securities which are under ASM List.
CDSL- Business and Valuation:
- On account of the stellar performance of the equity market in the last 1 year and remarkable outreach of the discount brokerage firms have resulted in the entrance of a large number of investors into the equity market.
- The majority of the discount broking companies like Zerodha, etc. open the customer account with the CDSL. The other security depository player in the market is NSDL.
- With the greater participation of the public in the market, the CDSL also registered some phenomenal figures in terms of New Account Openings.
- Based on this growth and facts, the CDSL stock is currently trading at a PE ratio of around 75.
- Also, in the Demat Account Market and Capital Market, there is a high under penetration in the country.
The CDSL stock is trading at a PE ratio of 75, which can be debated as premium valuation or overvaluation. And amid such actions from SEBI, the retail investor needs to be cautious. There is no second thought on the under penetration of the Capital Market in India and hence the Security Depository Company in India- CDSL and NSDL are likely to register strong growth in the long-term. There are good earnings and growth visibility in this sector. Do proper research and study before making and investment decisions.