Indian Railway Finance Corporation Ltd (IRFC), the financial arm of the Indian Railways, has experienced a remarkable journey in the stock market over the last year. In 2022, the company witnessed an impressive 85% surge in its stock value, attracting investors’ attention.
However, 2023 hasn’t been as fruitful, with a more modest 17.63% increase in stock value. In this article, we will delve into the reasons behind these fluctuations, examine the technical aspects, and explore expert opinions on the outlook of the shares.
IRFC Stock Performance in 2022 and 2023
- In 2022, the stock displayed exceptional performance, growing by a staggering 85%. This remarkable surge attracted considerable investor interest and drove the stock to reach its peak during the year.
- However, the subsequent year, 2023, hasn’t been as fruitful, with the stock’s value increasing by a relatively lower 17.63%. This disparity raises questions about the factors contributing to the change in IRFC’s stock trajectory.
Valuation Analysis of IRFC Stock
A key aspect of understanding the stock’s performance is its valuation compared to the sector. IRFC’s Price-to-Earnings (PE) ratio of 7.88 indicates that the stock may be overvalued compared to the sector’s average PE of 5.91.
This suggests that investors might be paying a premium for each unit of earnings compared to other companies in the sector. The high PE score aligns with the stock’s record high closing in the last session.
Technical Analysis of IRFC Stock
Technical indicators play a crucial role in predicting stock trends. The Relative Strength Index (RSI) of IRFC stands at 65.8, which signals that the stock is currently trading neither in the overbought nor in the oversold zone.
An RSI value above 70 typically indicates an overbought condition, while below 30 signifies an oversold condition. The one-year beta of IRFC is 0.8, indicating low volatility during the period.
Furthermore, the stock stands higher than various moving averages, including the 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day moving averages. This suggests that the stock has been consistently outperforming these averages, which may indicate a positive trend in the market.
Expert Opinions on IRFC Share Outlook
- Several market experts have shared their insights into the outlook of the stock. Aditya Gaggar, Director of Progressive Shares, highlights that IRFC faces a significant hurdle at Rs 37. A strong close above this level could be considered a Cup and Handle Formation breakout, with a potential target of Rs 49. The RSI breakout also supports this prediction.
- Abhijeet from Tips2Trades, on the other hand, notes that while IRFC is bullish, it is also overbought on the daily charts. The next resistance is expected at Rs 39.25, and a daily close below the support of Rs 35.3 could lead to a decline to Rs 32 in the near term.
- Osho Krishan, Sr. Analyst – Technical & Derivative Research, Angel One, points out that IRFC has seen significant traction in recent trading sessions, leading to new highs. The volume-based breakout around Rs 36 levels indicates the potential for further growth. The support zones lie around Rs 36-34, while the consolidation zone is at Rs 32-31.
- Manoj Dalmia, CEO of Proficient Equities, emphasizes that IRFC has repeatedly tested the current level of Rs 36.75 and is trading above the resistance level. A 12% return has been recorded over the past three months, and investors can expect a medium to long-term target of Rs 50.
Financial Performance
IRFC logged a profit of Rs 6,337 crore for the financial year 2022-23, showing steady growth. Revenue from operations for FY23 rose 17.70%, reaching Rs 23,891 crore, compared to Rs 20,298 crore reported in the previous year.
The earnings per share (EPS) of the company also improved, standing at Rs 4.85 at the end of FY23, compared to Rs 4.66 in the year-ago period. The board proposed a final dividend at 7% of the face value of Rs 10 each, equivalent to 70 paise per share for FY 2022-23.
Conclusion
In conclusion, the shares of Indian Railway Finance Corporation Ltd (IRFC) have witnessed a roller coaster ride in the stock market, with significant gains in 2022 and more modest growth in 2023. Technical indicators suggest that the stock is currently in a favorable position, while expert opinions on its outlook are mixed. As the market dynamics evolve, investors should carefully consider these factors before making investment decisions.
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FAQs
Why did IRFC’s stock surge in 2022?
IRFC experienced an 85% surge in its stock value in 2022, driven by various factors, including positive market sentiment, robust financial performance, and investor confidence in the railway sector’s growth potential.
Why has IRFC’s stock growth slowed down in 2023?
In 2023, IRFC’s stock growth slowed down to 17.63% due to various market factors, including changing economic conditions, sector-specific challenges, and profit booking by some investors after the significant gains in the previous year.
What is the current valuation of IRFC’s stock?
IRFC’s stock is currently trading at a PE ratio of 7.88, which indicates that the stock may be overvalued compared to the sector’s average PE of 5.91.
What are the technical indicators suggesting about IRFC’s stock?
The Relative Strength Index (RSI) of IRFC stands at 65.8, indicating that the stock is trading neither in the overbought nor in the oversold zone. The one-year beta of IRFC is 0.8, indicating low volatility during the period.
What do market experts say about the outlook of IRFC’s stock?
Market experts have varying opinions on the outlook of IRFC’s stock. Some believe that the stock has the potential for further growth, while others caution about potential short-term corrections.