Investors have raked up good gains in the last couple of months, all thanks to a sectoral strength in many sectors. But some stocks haven’t performed much due to a lackluster interest of investors. While not participating in the broader market rally is a weak sign for any stock, a rally during a consolidation phase of the broader markets is a good sign.
One stock that coming out of a beautiful base amid a drastic fall from the highs is NIIT Limited (NS:). The company is one of the most popular education services providers and especially focuses on talent and skill development. It offers multi-disciplinary learning management and training delivery solutions to corporations, institutions, and individuals. NIIT has a market capitalization of INR 4,752 crores and its shares are 3.36x more volatile than the index.
In FY22, the company recorded a 35.66% YoY growth in net revenue to INR 1,431.14 crores but is yet to cross its pre-pandemic revenue of INR 2,318.66 crores in FY20. The same story goes for net income, which is up 58.15% on a YoY basis to INR 226.19 crores in FY22 but is noticeable down from INR 1,327.45 crores of net profit recorded in FY20. But the good part is, that the growth is visible in the numbers.
Surprisingly, FIIs hold a high stake of 21.7% in the company, as of June 2022, while mutual funds own roughly 7.94%. These high stakes by astute investors are generally not seen in a small-cap company.
Image Description: Daily chart of NIIT with volume bars at the bottom
Image Source: Investing.com
Coming to the daily chart of NIIT, it’s no less than mouth-watering for mean-reversion traders. The stock has already faced a severe liquidation from the April 2022 high of INR 658.65 to a low of 340.4 in August 2022. This massive fall of around 48% seems to be over now. As the stock has started to reverse its trend, high-risk traders could exploit this opportunity. On Friday, the stock closed 5.43% higher at INR 372.85 which is quite a bullish closing. But more importantly, the stock has also surpassed the previous peak of INR 371 (the first time after a long time), which gives it a more profound bullish tone.
On the volume front, Friday’s volume stood at 1.17 million shares which is over 350% higher than the 10-day average volume of 258K shares (recorded a day before). Both volume and price action are pointing to a reversal from here. However, If the stock falls below INR 340, especially on a closing basis, the current reversal signal would be negated.
