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IIFL Securities Market Miracle: Jumps 200% to Reach All-Time High

IIFL Securities Market Miracle: Jumps 200% to Reach All-Time High
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Chart: IIFL Securities All Time High & 52 Week Low as of 27 Dec 2023

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IIFL Securities hit its 52 week low of ₹48.20 on 27 Mar 2023 and from there it move to ₹151.95 creating a brand-new All Time High on 27 Dec 2023, giving a whopping 200.00% return in just 9 months and 0 days.

If you had invested ₹10,000 at its 52-week low price, your investment would have grown to ₹30,000 by 27 Dec 2023. This represents a gain of ₹20,000 in just 9 months and 0 days. Given IIFLSEC's strong recent performance, Lets find out what opportunities lies ahead for IIFLSEC

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Understanding the Significance of an All-Time High

The all-time high of IIFL Securities can be a result of many factors. Its previous all-time high was made on 22 July 2021 at ₹ 128.5. It took 2 years, 5 months, and 05 days to create a new all-time high at ₹ 151.95 on 27 December 2023. In between, it made a low of ₹ 48.2 on 27 March 2023, implying a correction of over 62%. It may represent a change in the investors’ sentiment about the company due to improved financial condition or may represent overvaluation. Let’s go through the factors contributing to its all-time high.

Factors Contributing to a Stock’s All-Time High

Positive Earnings Reports

  • In the last 3 quarters, it has shown double-digit growth in revenue year-on-year. In Q2 FY24, its revenue reached ₹ 534 crores, which is 65.01% greater than in Q2 FY23.
  • Compared to the previous quarter, its revenue has increased by 23.92%, whereas the cost of goods sold increased by only 4.54%. Such a trend may continue in future, thus adding to the gross profit.
  • Its net income for Q2 FY24 reached 1080 crores on account of a lesser outgo towards taxes and an increased amount under non-controlling/minority interest.
  • Wealth Management Services are gaining traction in the Indian market, with many companies focussing on high-net-worth individuals (HNIs)/affluent segments. Companies like IIFL securities, which have been present in the market for many years, have an advantage over the companies that were formed in the last decade.
  • The total number of demat accounts in India stands over 126.6 million, and the number is still rising. Considering such a vast client base added every year due to retail participation in stock markets, it will directly benefit IIFL securities, which has built trust amongst the market participants in the last two decades.
  • Fintech startups are making it easy for new-time investors to enter the stock market. IIFl can collaborate with such startups, leveraging its digital infrastructure and gaining access to such companies’ innovative technologies.

Positive Analyst Ratings

HDFC Securities, in its October report, has given a bullish rating to IIFL securities in the near to mid-term. Due to the powerful push across capital market businesses, such a stance was provided. It is trading at a lower valuation compared to its peers, which is expected to narrow. HDFC Securities anticipates an 18% CAGR growth in the bottom line and a 13% CAGR growth in the topline over FY23-FY25E.

Potential Scenarios Following an All-Time High

(Based on the chart of 1-day timeframe)

Converting numbers and candles into information can provide us with the market’s stance on the stock, which may help us in making correct investment decisions. IIFL Securities was listed on 20 September 2019 and has completed only four years since its date of listing; thus, the data is insufficient to find a trend based on it for an all-time high. Our observations will be based on the 52-week highs. We have observed the chart behaviour from September 2020 onwards.

Limiting our study to the 52-week highs that were made after a gap of at least a month, few interesting observations can be made. It has broken its 52-week high three times, and every scenario was unique.

25 February 2021: A 52-week high was made with a red candle and high volume. It clearly indicates profit booking on the part of investors; thus, a correction of over 29% was observed before making a new high.

07 May 2021: A 52-week high was made with less volume, indicating lesser resistance to the formation of a new high. A price correction of over 14% was observed before making a new high.

25 August 2023: A 52-week high was made with high volume. A price correction of over 15% was observed before making a new high.

In all three cases, it was possible to buy the stock at the previous high, but depending on the clarity of the signal, the price correction level saw significant movement.

IIFL Securities Stock Analysis: Potential Supports and Targets

Wed 27 Dec 2023 - In a remarkable market development, IIFL Securities has soared to ₹151.95, setting a brand-new All Time High record! With this surge, there are chances of it becoming volatile, as many investors may like to book their profits by exiting or closing their positions. At this time potential investors and current stakeholders should keep an eye for opportunities for entry or exit.

Below you will find IIFL Securities's metrics highlight, potential support and targets derived using Fibonacci Retracement and Extensions method, where Golden Ratio is assumed to be a good support (entry point) and Golden Extension to be good resistance (target point)

KEY PERFORMANCE METRICS

MetricsValueOccured On
Close Price₹144.60Wed, 27 Dec 2023
52 Week High₹151.95Wed, 27 Dec 2023
52 Week Low₹48.20Mon, 27 Mar 2023
All Time High₹151.95Wed 27 Dec 2023

The above table shows that the close price of IIFL Securities on Wed, 27 Dec 2023 was ₹144.60. Notably, the All-Time High is same as the 52-Week High, indicating that the all-time high was achieved recently and it cloud be a strong resistance level which would need great upward momentum to break.

It's possible that some investors might consider booking profits near the 151.95 mark, which could apply downward pressure on the stock price. But what does this newly created milestone signify for potential investors? Lets find out.

IIFL Securities Fibonacci Retracement Or Support levels

For those considering an entry, the Golden Ratio (61.8%) retracement level of ₹87 offers a promising point, given the likelihood of a pullback from these levels as new investors might come in at these levels.

Retracement or Support LevelsValues
S123.6%₹127
S238.2%₹112
S350.0%₹100
S461.8% (Golden Ratio)₹87
S578.6%₹70
S652 Week Low₹48

Note: This table was last updated on Wed, 27 Dec 2023.

IIFL Securities Fibonacci Extensions Or Target levels

For those considering an exit, the Golden Extension (161.8%) level of ₹216 offers a promising point, given the likelihood of a downward momentum from these levels as investors might start booking their profits at these levels.

Extensions or Target LevelsValues
T152 Week High₹151
T2138.2%₹191
T3161.8% (Golden Extension)₹216
T4200%₹255
T5261.8%₹319

Note: This table was last updated on Wed, 27 Dec 2023.

Making Informed Investment Decisions

For any stock, reaching an all-time high is a significant milestone. Still, conducting thorough research and considering various factors is essential before making investment decisions. To make informed choices that align with your investment goals and risk tolerance, one needs to analyse the company’s fundamentals, industry trends, management’s strategy, and overall market conditions.

Company’s Financial Health

  • In FY23, IIFL Securities had a debt of ₹ 516 crores with a negative free cash flow of ₹ 813 crores and cash & equivalents of ₹ 170 crores. It needs to increase its funds to a level at which it can efficiently service its debt and still have enough free cash flow to face any financial difficulty in future.
  • It has total assets worth ₹ 7001 crores, covering its total liability of ₹ 5466 crores. If the sum of free cash flow and cash & equivalents remains less than the debt for a long time, then it may need to sell a few of its assets to raise capital.
  • Its dividend payout ratio has increased continuously in the last three years, but it is not supported by adequate cash flow, which may put the company in a difficult situation.

Industry Outlook

  • Indian investors are becoming interested in cross-border investment opportunities but lack the means to do so directly through Indian companies. The companies involved in trading in securities business can take advantage of such a shift and capitalise on its reach to generate more revenue.
  • We may see an increased use of AI and machine learning even by retail investors in trading, which may require companies to update their portfolio of services to provide such options either in-house or through collaboration with companies involved in AI and machine learning.
  • Taxes affect not only the investments but also the trading volume. Positive regulatory changes and low tax rates may motivate investors to participate aggressively in the market, as is seen in developed countries.

Market Sentiment

IIFL Securities reaching an all-time high is supported by various positive financial outcomes, making the prospect of the company more lucrative amongst investors. The revenue of ₹ 1080 crores in Q2 FY24 can have a significant contribution in creating a new milestone in terms of annual revenue due to efficient cost management and tax optimisation. The rising number of demat accounts, along with the demand for wealth management services, is a positive trend for future revenue growth. Investors should also consider IIFL’s financial obligations, including a debt of ₹516 crores and a negative free cash flow of ₹813 crores, which may pose financial difficulty in future. Investors need to conduct detailed research, considering factors like company fundamentals, industry trends, and financial health, to make informed investment decisions.

Disclaimer: Information is provided ‘as is’ and solely for informational and educational purposes, not for trading purposes or advice. We highly recommend to do your own research before making any investment.

About The Author

Nippun

Hi, I’m Nippun, a tech enthusiast from Haryana, India. I have been coding since 2010 and using my coding skills in the share market since 2020. I have been coding scripts in Pinescript that work on Tradingview app/web. I love learning about new technology and applying it to solve real-world problems. Coding and share-market are my passions, and I enjoy finding and fixing bugs in code. I aim to share my skill set and experience that can positively impact society. Feel free to connect with me, and let’s learn from each other. My Twitter