Is the bottom near for Nykaa shares? Here's what charts say

Shares of Nykaa have managed to hold ground above its all-time low despite multiple bouts of selling pressure from pre-IPO investors, thus raising hope for the bulls at the counter

FSN E-Commerce Ventures, the parent company of Nykaa, has been in the limelight amid negative news flow. On Tuesday, private equity fund Lighthouse India offloaded stake in the company via block deals for the third time this month. Later in the day, the company informed exchanges that its chief financial officer (CFO) had resigned.

Arvind Agarwal, the CFO at Nykaa, tendered his resignation seeking new opportunities in the digital economy and start-up space, according to the filing with exchanges. His exit may cause more anxiety at the counter as it comes at a time when the stock is witnessing heavy sell-off from pre-IPO investors. READ MORE

So far in November, Lighthouse India has sold Nykaa's shares in three tranches as soon as the lock-in period for pre-IPO investors expired on November 10. The fund sold 9.6 million shares on November 10; 30 million shares on November 16; and 18.4 million shares on November 21.

Apart from Lighthouse, another pre-IPO investor TPG Capital, an American investment company, also sold 54 million shares via block deal on November 18.

The weakness at the counter is seen despite the company reporting strong September quarter earnings. The fashion retailers Q2FY23 net profit jumped three-fold to Rs 5.19 crore, when compared to the year-ago preiod. However, follow-up selling pressure owing to exit by pre-IPO investors has kept the stock under pressure.

On the bourses, shares of Nykaa have not performed well since its debut in November 2021. Adjusted for 5:1 bonus issue, the stock's all-time high stands at Rs 429.80. 

The stock hit an all-time low of Rs 162.82 (hit in October), however, has not been capitulated despite staggering sell-off from the pre-IPO investors after the lock-in period expired this November. This eventually points to an accumulation or a scenario in which selling pressure is being absorbed.

Historically, such chart textures suggest a bottoming out sentiment, but the stock needs to reflect sustainability, with lower levels building resilient strength. The stock needs to develop resilience towards any major pounding.

As long as the support range of Rs 162 to Rs 160 is protected, the stock could show some respite to the selling it underwent since March this year. 

The overall bullish bias would emerge only when the stock succeeds to leap over the hurdle of Rs 218, its 100-day moving average (DMA), which it has failed to endure since April this year. The stock did attempt to conquer this hurdle on the next day after the lock-in period expired, but the selling pressure again pushed it back to Rs 180 to Rs 170 range. 

The overall trend remains subdued, but if the stock holds ground over Rs 162- Rs 160 range, bolstering positive momentum, then the stock could certainly exhibit a smart reversal. CLICK HERE FOR THE CHART