A decline in NASDAQ in the previous week has caused quite a stir among top tech stocks in the Indian stock market. Shares of listed startups feature tremendous pressure due to the negative bottom line and higher valuations, which has agitated investors’ sentiments. Now, amid the global stock market seizure, Indian investors are jittered.
But what is the reason behind the decline of global and Indian stock exchanges? Let’s find out.
Top Tech Stocks in Decline
Stock markets have been under massive pressure since the beginning of 2022. This is due to the US Federal Reserve’s anticipatory interest rate hike. This news greatly affected investors who became skeptical about the stock market performance.
Now, with this sharp decline in NASDAQ, technology investors worldwide are panicking. In the previous week, the NASDAQ index fell around 7%.
A steep decline in this index directly affected Indian tech stocks’ performance. Refer to the table below to know how top tech companies performed this week.
|Stocks||Opening Price||Week’s High||Closing Price|
|Zomato||Rs. 134.05||Rs. 134.35||Rs. 113.75|
|Nazara Games||Rs. 2,521.4||Rs. 2,625.75||Rs. 2,509.15|
|EaseMyTrip||Rs. 580.4||Rs. 599||Rs. 565.40|
|CarTrade||Rs. 843||Rs. 877.8||Rs. 813.20|
|Fino||Rs. 416.8||Rs. 416.95||Rs. 391.80|
|Nykaa||Rs. 2,067.25||Rs. 2,085.45||Rs. 1,992.40|
|PolicyBazaar||Rs. 959.9||Rs. 1,046.2||Rs. 864.45|
|Paytm||Rs. 1,123.15||Rs. 1,123.15||Rs. 959.90|
|RateGain||Rs. 478.4||Rs. 522.05||Rs. 431.55|
|MapmyIndia||Rs. 1,715||Rs. 1,900.55||Rs. 1,606.85|
As seen in the above table, Zomato and Paytm dipped the most. The food delivery player dropped below its listing price of Rs. 115.
Explanations for Such Decline
Most prominent startup investors in India expect a decline in private valuations during a significant correction in the US markets.
While a few investors are of the notion that there will be correction regarding the high valuation in private markets as opposed to public markets, in case there is a massive sell-off. On the other hand, some investors openly believe in a change in market sentiments with a correction in the funding of startups. This could be a potential warning sign for such startups that experience a funding slowdown.
Regarding this, some analysts believe that a fall in stock prices will result in a reasonable startup valuation in the country. This will also lead to increased caution from investors that price IPOs, including anchor investors.
Meanwhile, the executive vice-chairman of Kotak Mahindra Bank said that startups might need to conduct a rigorous health check before launching their initial public offering. This could help them from facing significant problems while hitting the markets. Moreover, it should be the responsibility of companies to ensure that investors get enough opportunity for sustained growth, rather than just listing gains.
A large number of investors in the startup ecosystem have been opinionated about this correction’s forthcoming for a long time. As seen in 2021 as well, valuations of startups have overheated.
While the market sentiment was bullish for most of 2020, as inflation kicks in and COVID-19 subsides, the top focus of investors is yet again on sustainability, long-term bets, and profitability. In 2022, the tech IPOs nature in India will change dramatically as companies will look for more conservative valuations.
Source – Inc 42
Frequently Asked Questions
- What is Zomato’s market cap in 2022? As of the latest results of January 2022, Zomato’s market capitalization stands at Rs. 89,537 crores.
- How does the funding activity in 2022 look so far? As of now, there have been around 128 funding deals generating as much as $2.4 billion.
- Which is the top-performing sector in the post-pandemic scenario? The Indian healthcare sector is the top performer in the post-pandemic scenario, with over 131 deals and $2.2 billion funding in 2021.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.