Paytm shares gain for third day in a row; Here's what you should do

Shares of One97 Communications, parent of Paytm, continued their winning run for the third session in a row on Tuesday (March 19), hitting a day's high of ₹408.85 on the NSE. The stock jumped nearly 5% on the intraday basis amid strong volumes. At 12:17 pm, the scrip was trading 4.80% higher at ₹407.90.

The gains were largely due to an approval by the National Payments Corporation of India (NPCI) for Paytm to participate in UPI as a third-party application provider (TPAP) under the multi-bank model.

Following the development, global brokerage firm Morgan Stanley reiterated its 'Equal-Weight' stance on the stock with a price target of ₹555 per share.

On Monday, domestic broking firm YES Securities upgraded the counter for the first time since it started covering the Paytm stock. Paytm shares have seen a sharp sell-off after the Reserve Bank of India (RBI) ordered the fintech major to wind up its Paytm Payments Bank (PPBL) over various compliance issues.

According to YES Securities, the NPCI approval for Paytm to participate in UPI as a third-party application provider (TPAP) in the multi-bank model will keep its UPI business intact.

Four banks viz. Axis Bank, HDFC Bank, State Bank of India, and YES Bank will act as Payment Service Providers (PSP) to Paytm, and help facilitate the electronic transactions between various parties using the Paytm app to make payments.

In an interaction with CNBC-TV18 today, Ashi Anand, CIO-IME Strategies at Valcreate Investment Managers, said, "If you look beyond the current kind of weakness, and understand the way these platforms are going to evolve from three- to five-year perspective, we are seeing a lot of value in Paytm at the current point in time."

From a long-term perspective, Anand finds the Paytm stock to be very interesting to 'Hold', as the fund manager sees all digital platforms as longer-term plays. "Since they're no longer doing banking, that entire regulatory compliance is no longer Paytm’s issue any longer."

In the short term, the fund manager said Paytm will remain volatile. Numbers during the fourth quarter of FY24 and the first quarter of FY25 are not going to look pretty, said Anand, while adding, "The entire lending business is going to vanish near term until kind of lenders don't see stability in terms of the monthly transacting users and get comfortable back to lending."

Atul Parakh of Bigul said that volatility may be seen in the short term, but long-term investors should critically assess Paytm's ability to achieve profitability, address regulatory issues, and control costs.

On the charts, Paytm's Relative Strength Index (RSI) stands at 42.4, indicating it's neither trading in the oversold nor overbought territory. The counter has a one-year beta of 0.4, suggesting very low volatility during the same period.

Paytm's shares made their stock market debut in 2021 and have been one of the biggest wealth destroyers in recent times. The stock is down nearly 80% from its IPO price of ₹2,150.