When these new-age tech stocks went public last year, investors bet heavily on them. High valuations, which many felt were unjustifiable, and complicated business models in some cases did not deter investors.
One97 Communications, Paytm’s parent company, has seen its shares fall 4.31 percent since Friday’s close. On Monday, they hit a record low of Rs 751.0. Its market value has dropped below Rs 50,000 crore.
Concerns about global oil prices caused the broader Indian market to close in the red for the fourth consecutive session. Which reached its highest level since 2008 in the aftermath of the Ukraine-Russia conflict. The S&P BSE Sensex fell 2.74 percent, while the NSE Nifty 50 Index fell 2.35 percent.
The stock will be listed on Indian exchanges in November 2021. It was worth approximately Rs 1.39 lakh crore in the market. It has now dropped by 65 percent in less than three months.
The stock made a strong debut when it was listed in November 2021, with a market cap exceeding Rs 1 lakh crore. In just over three months, the market value of the online beauty stock has dropped by nearly 40%.
Analysts from various brokerage firms believe that such new-age digital stocks are currently experiencing significant corrections. It is due to higher valuations and the global economic impact, but it is expected to rise significantly over the next three to five years.
Paytm’s shares have been in a free fall since the company debuted on the stock exchange in November 2021, at Rs 2,150 per scrip – a valuation that several analysts believe is not justified. Concerns have also been expressed about a lack of clarity regarding Paytm’s path to profitability and business model.
The Street has also stated that, despite having a large user base, Paytm no longer stands out due to rising competition in the sector. Paytm has responded by doubling down on its lending business, which analysts and financial experts have identified as one of the company’s most profitable endeavors.
Worse Not Over Yet
One big question is whether FIIs will continue to be interested in new-age tech stocks in the future, which is already a big factor in India. Will rising interest rates in the United States have an impact on India’s new-age technology stocks? Will foreign investors, or FIIs, rekindle their interest in technology startups? Of course, the Russian-Ukraine conflict complicates matters, and a war is never good for stock markets.
Another factor contributes to the vulnerability of these stocks. Modern technology firms are essentially “classic growth” stocks. While investors’ preferences are shifting toward value stocks due to the high likelihood of gradual rate hikes. Inflationary concerns and geopolitical crises persist.
