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The Indian markets are witnessing a heavy sell-off since Wednesday after Hindenburg’s report on Adani Group’s alleged “biggest financial scam in corporate history” created widespread panic. In the midst of already weak sentiments, one stock that absolutely disgruntled investors in today’s session amid its Q3 FY23 earnings report is Dixon Technologies (India) Ltd (NS:).
It is a home electronics and appliances company, primarily manufacturing consumer durables, and has a market capitalization of INR 20,009 crores. The company’s revenue fell 22% YoY to INR 2,408.23 crores, however, a net profit of INR 51.91 crores translated into improved PAT margins of 2.2%, compared to 1.5% a year ago. The revenue from its Mobile & EMS division (the biggest contributor of total revenue) tanked a noticeable 43% QoQ to INR 915, leading to a 21% QoQ cut in operating profit to INR 33 crores. The company also slashed its revenue guidance for FY23 to INR 12,200 – INR 12,700 crores, from the earlier forecast of INR 15,000 crores.
Image Description: Daily chart of Dixon Technologies (India) with volume bars at the bottom
Image Source: Investing.com
The share price of Dixon Technologies nosedived to hit a 20% lower circuit in today’s session, falling to the day’s low of INR 2,670.75, which is the new 52-week low. Now, the question is what should traders do from here?
The intensity of the fall can be gauged by the fact, that a total of 3.77 million shares exchanged hands, by 12:43 PM IST, which is the second-highest one-day volume in the history of the stock and a whopping 2,170% higher than the 10-day average volume of 166K shares. Hence, one should not question the strength of the downtrend, and looking for selling opportunities in this trend would probably be a better idea.
The stock is already oversold, with the RSI (daily, 14) showing a reading of 9.07, the lowest since it started trading on the NSE. A single-digit RSI value isn’t giving comfort to go short as the possibility of even a minor bounce back is very high. So here’s the deal.
The last support of the stock which was sliced through in today’s session was around INR 3,200. Waiting patiently for this level before thinking of going short is better from a risk-to-reward perspective. However, nimble traders who want to try to place a contra bet, first need to find an ideal exit level for which waiting for a few days for the stock to stabilize would provide the lowest point, which could be used as a stop loss level. Going long when the stock is falling aggressively is like trying to catch a falling knife, which is generally not recommended, but waiting for this knee-jerk reaction to fade would reward better on the long side.
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