Zomato shares enter correction zone: Hold or book profits?
Zomato's shares have entered the 'correction zone' in early trade on Monday. The development comes a day after the food delivery aggregator's stock was added to the benchmark BSE Sensex index, replacing JSW Steel Ltd. The change was effective from the close of business last Friday. Over the last six months, Zomato's shares have witnessed a massive 45% surge and an astonishing 133% in 2024 alone.
Zomato's market capitalization surpasses ₹2.1 trillion
The strong rally in Zomato's stock has taken its market capitalization to a whopping ₹2.1 trillion. JSW Steel's stock, on the other hand, has only gained 1.1% in the last six months and 5% YTD. On Monday, Zomato's shares plummeted as much as 3.3% to ₹272.60. The stock is down 12% from its lifetime high of ₹304.70 on December 9 this year. A drop of over 10% from respective 52-week peak is usually termed a 'correction.'
Zomato's stock performance and analyst predictions
Zomato's stock is trading above the 200-day moving average but below the 21-day exponential moving average. The scrip is testing the immediate support of ₹279 level, two standard deviations below the 14-day moving average. A close below this level could trigger further downside for the stock. Despite a slight dip in early trade on NSE, 24 out of 26 analysts tracking Zomato's shares maintain a 'buy' rating while only two suggest a 'sell.'
Zomato's Sensex inclusion expected to attract significant inflow
After being added to the Sensex, Zomato is expected to see an inflow of $513 million or around ₹4,356 crore, according to Nuvama Alternative & Quantitative Research. The company's market cap has jumped 162% to ₹2.83 lakh crore this year, overtaking Tata Motors Ltd. in terms of market value. Zomato's competitor Swiggy has also performed well since its exchange debut last month, rising 30%.
Zomato's financial turnaround fuels stock rally
Zomato's financial turnaround is a major factor behind the stock rally. The company swung into profitability last fiscal year and continued the trend. In the July-September quarter, consolidated revenue from operations soared 69% to ₹4,799 crore while net profit jumped five-fold from the previous year to ₹176 crore. This was attributed to steady growth of food delivery margins and quick commerce operations nearing break-even point.
