Paytm stock up 140% in 6 months. Should investors book profits or hold on? Experts weigh in | Stock Market News

Paytm investors have plenty to smile about at this juncture. The stock has rewarded their faith and patience by delivering an impressive 140 per cent return over the past six months.

Things have turned around dramatically for the stock, which faced a sharp selloff earlier this year. On January 31, the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank Ltd (PPBL), barring it from accepting deposits or top-ups in customer accounts, wallets, or FASTags after February 29. The stock nosedived by over 42 per cent in the next three sessions from February 1 to February 5.

On May 9 this year, the stock plumbed its all-time low of ₹310 on the BSE. However, it started witnessing healthy buying interest after that. The stock hit its 52-week high of ₹951.90 on November 29. On a monthly scale, the stock has been in the positive zone since June this year.

For Q2FY25, Paytm parent One 97 Communications reported a profit after tax (PAT) of ₹930 crore due to a one-time exceptional gain of ₹1,345 crore from the sale of its entertainment ticketing business. The company’s revenue rose by 10.5 per cent quarter-on-quarter.

Recently, global brokerage firm UBS hiked the stock’s target price to ₹1,000 from ₹490 while maintaining a ‘neutral’ stance.

UBS emphasised that the company’s next growth phase must be driven by revenue, as most cost optimisation efforts have already been realised.

With Paytm stock delivering strong gains over the past six months, many investors are grappling with the question: should they book profits or stay invested?

Mint consulted fundamental and technical experts for their insights on what investors should do. Here’s what they had to say:

Fundamental views

Abhishek Pandya, Research Analyst, Stoxbox

Paytm has made a strategic shift in its lending operations by offering a default loan guarantee (DLG) on the distribution of merchant loans.

This marks a significant shift from its previous role as a distributor of loans to now providing a guarantee against potential defaults.

Further, the recent approval from the Ministry of Finance for FDI investment into its subsidiary, PPSL, and the subsequent reapplication for a payment aggregator (PA) license with the RBI marks a pivotal moment.

This clearance reduces regulatory uncertainties and unlocks opportunities for Paytm to onboard new merchants and expand its payment gateway business.

Additionally, Paytm’s stable UPI market share amidst a competitive landscape and resilient merchant subscriber base reflects a robust operational model.

With improved device features and management’s strategic focus on reactivating inactive users, enhancing ARPU, and scaling its ecosystem, Paytm is well-positioned for sustained growth.

Paytm announced the sale of its movie ticketing business (TicketNew) and events business (Insider. in) to Zomato for a cash consideration of ₹20.5 billion.

Pandya believes that this transaction is positive for Paytm, as the company would narrow its focus to financial services – payments (consumer and merchant), distribution of financial services (loans, insurance, broking, cards), etc.

Pandya maintains a bullish stance on Paytm stock from a medium to long-term perspective.

Atul Parakh, CEO of Bigul

Paytm’s stock surge is underpinned by a combination of resolved regulatory issues, positive ratings, improved financial metrics, a one-time gain from the sale of its movie ticketing business and an optimistic outlook for future growth.

As the company continues navigating the competitive landscape of digital payments and lending, these developments will likely buoy investor confidence.

The overall market sentiment towards fintech companies has improved as investors anticipate a rebound in digital payment transactions and loan origination activities.

Technical views

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers

At the current juncture, Paytm’s price action has exhibited a bearish divergence near the R3 level of the Camarilla pivot, which is a significant resistance zone.

A bearish divergence occurs when the price of an asset makes higher highs, but an accompanying technical indicator, such as the Relative Strength Index (RSI) or MACD, shows lower highs.

This indicates a potential weakening of bullish momentum and often signals a reversal or a corrective move.

The R3 pivot level is a key resistance point derived from intraday or short-term price levels, and breaching this level requires strong bullish momentum, which appears to be lacking here.

“Given these technical signals, there is a likelihood that Paytm’s price may face downward pressure and could retrace toward the ₹850 level in the near term. As a result, it is prudent to book profits on existing positions at this stage and avoid initiating long new positions until further confirmation of a bullish continuation or a stronger support level emerges,” said Patel.

Mandar Bhojane, Equity Research Analyst, Choice Broking

Paytm has surged nearly 50 per cent in the past three months, demonstrating a strong uptrend with consistent higher highs and higher lows. 

However, the stock is currently consolidating between ₹950 and ₹880, indicating profit-booking at higher levels. 

This consolidation phase is healthy and provides a pause for the stock after its sharp rally. 

From a technical perspective, Paytm trades above its key exponential moving averages (20, 50, 100, and 200 EMA), highlighting robust bullish momentum. 

The Relative Strength Index (RSI) stands at 63, suggesting moderately strong momentum but not yet overbought. These indicators collectively affirm the stock’s underlying strength.

“Investors holding the stock from lower levels may consider booking partial profits while keeping the remaining position for potential upside targets of ₹1,000 and ₹1,100. On the downside, ₹850 is a critical support level and a buy-on-dip opportunity, while ₹800 should act as a stop-loss for long trades,” said Bhojane.

“A sustained move above ₹950 will confirm renewed bullish momentum, opening the door for higher targets. However, traders and investors should monitor price action closely near the support and resistance levels, entering positions only upon confirmation of reversal patterns,” Bhojane said.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.