Prestige Estates shares at four-month low but have valuations corrected?

Shares of Bengaluru-based real estate company Prestige Estates Projects Ltd. have declined for the eighth consecutive day on Tuesday. The stock witnessed a decline of over 1.5% on Tuesday.

Over the past eight trading sessions, it has experienced a notable correction of over 19%. This decline marks a significant downturn from its recent peak of ₹1,440, representing a substantial drop of 32%. With Tuesday's decline, the stock has reached a four-month low.

Technical analysis indicates that the stock's setup has shifted to "oversold" territory, with the Relative Strength Index (RSI) plummeting to 26. An RSI reading below 30 signifies that the stock is in an "oversold" condition.

Additionally, the stock is trading below both its 50 and 100-day moving averages. Looking ahead, the stock's 200-day moving average is situated at ₹856.

Despite this correction, shares of Prestige Estates are trading at a financial year 2025 price-to-earnings multiple of 37 times, which is well above the five-year average price-to-earnings multiple of 19 times.

"Prestige had a vertical rally in the last few months which was in line with how other realty stocks behaved. However, it is now forming a bearish island reversal pattern on the monthly charts. This major reversal pattern will get triggered on a monthly close below ₹980 and once confirmed it can push the stock towards ₹800 levels," said Gaurav Bissa of InCred Equities.

"Interestingly, 50% Fibonacci retracement is placed around 800 which can act as a strong support. Investors wishing to buy Prestige are advised to avoid doing so till the charts don't see stability," he added.

In an interaction with CNBC-TV18 on March 1, Prestige Estates CMD Irfan Razack said there is a lot more to go for the real estate upcycle and there are plenty of opportunities available across the country in the housing segment.

Razack also said there will be three completions in Mumbai for the company in the financial year 2025 and India's financial capital will contribute ₹5,000 crore to sales by the end of the next financial year. He also expressed confidence that the company will cross ₹20,000 crore in sales at the end of the current financial year.

Shares of Prestige Estates are trading 2.4% lower, extending losses at ₹981.30.