KPIT Tech shares sink 17%, see worst plunge since 2020 Covid crash. Time to buy or more pain ahead?

Shares of KPIT Technologies tumbled 17% to hit a fresh 52-week low on Wednesday, as a weaker-than-expected Q1 business update put the stock on track to record its worst single-day plunge since the infamous COVID-19 crash of March 2020.The shares of the company dropped around 17% to a low of Rs 559.20 apiece on Wednesday morning.

The sharp drop wiped off more than Rs 3,080 crore from the company’s market capitalisation, pulling it down to Rs 15,330 crore.Why KPIT Tech shares are falling today?KPIT Tech on Tuesday said that it expects the financial performance for the April-June quarter of the ongoing financial year 2027 to be lower than expected previously, due to a sudden drop in revenues in the last few weeks.

It expects a decline of 1% in reported revenues for Q1 FY27 as compared to Q1 FY26 (YoY) primarily due to sudden actions by some European OEMs triggered by their recent profit warnings or adverse business outlook, it added.

As a result, its operating profitability (EBITDA Margin) and the net profit margin for Q1 FY27 will likely decline sequentially, proportionately higher than the revenue decline, since there is no window for cost optimization during this short period.

“While the H1FY27 performance would be unsatisfactory, the fundamentals of our business remain strong,” it added.“This impact was not seen coming earlier and has been realized only in the recent weeks.

Such sudden actions is a short-term phenomenon.

In the long run cost-cutting measures by clients would imply more outsourcing and offshoring with more automation led by our products and solutions, which is already indicated by the said clients and evidenced earlier during COVID & similar circumstances,” KPIT Tech added.Also read: KPIT Tech shares crash as company expects Q1 revenue decline, sharp hit to marginsTime to buy KPIT Tech?

Here’s what technical charts indicateKPIT Tech shares have witnessed a decisive breakdown, and is now trading close to the levels last seen in September 2022, reflecting significant weakness in the price structure, said Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities.

He noted that the momentum remains firmly bearish from a technical perspective.“The RSI has slipped below 20 and continues to trend lower, highlighting extremely weak momentum.

The Directional Movement Index (DMI) also paints a negative picture, with the DI- line widening sharply above the DI+, indicating that sellers remain firmly in control.

Adding to the bearish outlook, the stock is trading well below its key short-term and long-term moving averages and has also moved significantly below the lower Bollinger Band, underscoring the intensity of the ongoing downtrend,” the analyst explained.Also read: Why KPIT Tech shares crashed 15% today?

The BMW & Volkswagen connection explainedHarshal Dasani, Business Head at INVasset PMS, highlighted that the technical downside references cluster around JPMorgan's Rs 550 target zone, which coincides with prior consolidation lows and would represent roughly another 18% correction from current levels.

“Recovery attempts should now be treated as bounces within a downtrend rather than trend reversals.

The technical setup calls for patience until either RSI reaches deeply oversold conditions with a reversal candle, or a decisive close above the Rs 749-760 zone with volume confirms structural repair,” he added.According to Shah, the next immediate support is placed in the Rs 555-550 zone, which also served as the base for the strong rally witnessed in September 2022.

A decisive breach below this support could trigger another leg of weakness.

On the upside, Shah sees the Rs 625–630 zone is likely to act as the immediate resistance.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.

These do not represent the views of The Economic Times) ...