Mumbai: Shares of Patanjali Foods Ltd. plunged as much as 17.1 per cent during Tuesday’s trading session, extending losses for the third consecutive day amid signs of fresh bearish bets in the derivatives market.

The sharp decline was accompanied by heavy trading volumes and a significant increase in futures open interest, indicating that traders were building fresh short positions as the stock continued to weaken.

Shares hit multi-year low

Patanjali Foods shares fell to an intraday low of Rs 337.85, marking one of the steepest single-day declines for the stock in recent months.

According to Bloomberg data, the stock also declined to Rs 395.10, below any previous closing level recorded since July 13, 2023.

The fall came even as the broader equity market remained positive, with the Sensex gaining around 0.7 per cent during the session, while the MSCI Asia Pacific Index rose 2.2 per cent.

Futures data indicates fresh short build-up

Derivatives data pointed to the creation of fresh short positions in Patanjali Foods.

Typically, when stock prices decline alongside a rise in futures open interest, it signals that traders are adding new bearish positions rather than merely closing existing ones.

The July futures contract fell 18.08 per cent to Rs 333.90, while its open interest increased by 22.25 per cent.

Similarly, the August futures contract dropped 18.61 per cent to Rs 333.60, accompanied by a sharp 283.2 per cent increase in open interest.

The September futures contract declined 19.8 per cent to Rs 331.40, with open interest surging 637.5 per cent, indicating strong participation from traders taking fresh short positions.

Trading volumes jump sharply

The sell-off was supported by unusually high trading activity.

Bloomberg data showed that nearly 5,19,668 shares had changed hands during the session, almost six times the 20-day average trading volume of 89,790 shares for the same time of day.

The data also indicated that 41 per cent of traded shares were executed at the ask price, while 25 per cent were traded at the bid price, reflecting heightened market activity during the decline.

Stock underperforms peers

Over the past 52 weeks, Patanjali Foods shares have declined 27 per cent, significantly underperforming their peer group, which has delivered a 4.1 per cent gain over the same period.

In comparison, the Sensex has fallen 6.3 per cent during the past year.

The stock has also remained under pressure in the short term, declining 3.5 per cent over the past five trading sessions and 7.2 per cent during the last 30 days, according to Bloomberg data.

Valuation metrics

Bloomberg data showed that Patanjali Foods currently trades at around 25 times its estimated earnings for the next 12 months and approximately 24 times trailing earnings.

The stock is valued at 3.3 times its book value.

Its trailing 12-month dividend yield stands at 1.1 per cent, while Bloomberg Dividend Projections estimate a forward dividend yield of 0.4 per cent.

Analysts maintain bullish outlook

Despite the recent weakness in the share price, analysts continue to maintain a positive long-term view on Patanjali Foods.

According to Bloomberg data, all five analysts tracking the stock have assigned ‘Buy’ ratings, with no ‘Hold’ or ‘Sell’ recommendations.

The stock carries a consensus rating of 4.8 out of 5, where one represents a strong sell and five represents a strong buy.

Bloomberg data also showed that the average consensus target price stands at Rs 554.25, implying a potential upside of around 40 per cent from the last traded price.

While the stock remains under pressure in the near term due to increased bearish positioning, analysts continue to express confidence in its longer-term growth prospects based on current valuation and earnings expectations.