Retail investors grappling with new age stocks

Badrinarayanan K S | Updated on: Mar 19, 2022

Zomato adds 1.5 lakh investors; Paytm 52,000

The brutal sell-off in new-age technology companies has caught retail investors off-guard. Shares of Paytm, PolicyBazaar, Nykaa, Zomato and CarTrade Tech have been at the receiving end as they fell 40-70 per cent from their peak prices. However, the sharp slide failed to deter retail investors in Zomato and Paytm (One 97 Communications) as they added these shares on every decline.

New-age technology stocks in the US were the hardest hit on fears that higher interest rates will continue to eat away at valuations that are based on future profits. The repercussions of this sell-off in the US were seen in recently listed new-age technology stocks in India in the past few months.

Over 1.5 lakh new small investors have entered Zomato despite the food-delivery app major seeing a steady decline after peaking at ₹169.10 within a few days of listing. At the end of December 2021, 7.88 lakh small investors held 1.6 per cent stake in the company as against 6.37 lakh investors, who had entered the company during the IPO.

Similarly, Paytm, despite perennial falling since listing, attracted 52,000 new investors within 45 days (between November 15 (listing date) and December 31, 2021).

The CarTrade stock was not that inspiring, as it saw exit of 2.77 lakh investors between August (listing) and December 2021. Currently, the stock is down 64 per cent from its peak. 

Nykaa (FSN E-Commerce) whose stock is relatively stable also saw an exit of 1.56 lakh shares while PB Fintech witnessed an exodus of over 2 lakh investors since listing.

Most of these are high-growth but loss-making companies from the start-up space. Except Paytm, most of these new age tech stocks listed with substantial premiums on stock exchanges driven by interest from first-time retail investors, who were exposed to these companies in their daily life, said Vishal Wagh, Research Head, Bonanza Portfolio.

“High valuations for companies such as Zomato, Paytm, CarTrade Tech and others were justified by the fact that in a low interest rate and high liquidity world, growth can be discounted into the future,” he added.

Some analysts believe retail investors nowadays become smarter as well. “Unlike earlier where investors used to sit on loss making stocks for years together, now some sharp brains are never afraid to exit with a minor loss,” said a market veteran based at Chennai. “A lot of new investors are also willing to subscribe for data as well as advisory, and take informed decisions,” he added.

According to Vishal Wagh, “In the rising interest rate scenario, we believe that investors should refrain from these new-age technology stocks and invest in profit-making stocks which have a good business model.” Investors can look into these companies once they turn profits, he added.

Published on March 18, 2022

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