One stock that continues to be a focus is Groww…The share price of Billionbrains Garage Ventures, the parent firm of Groww, plunged 10% and is locked in the lower circuit. The stock price fell after a strong rally for six consecutive days, when the prices surged over 94% from the issue price.
5 reasons why Groww shares plunged 5%
In case you are also wondering why the Groww shares plunged, here is a look at the key triggers:
1. Grow shares see short squeeze
Market veteran Ambareesh Baliga explained, “The float was very low. As a result of this there wasn’t much selling initially, though most people had been negative on growth based on their valuations. People would have also gone short, thinking that they will buy back but that didn’t happen. So, because of this, there was a short squeeze. And every other day, when you see shorts being auctioned, automatically, the trader sentiment in the stock moves up. As a result, we saw this sort of a move.”
2. NSE auction window
In a news report, Moneycontrol said that more than 30 lakh shares were flooded into the auction window of NSE. The stocks on the auction window were pushed by short traders who anticipated that the post-listing of the stock would see profit-booking, but the traders couldn’t arrange the stocks at the time of delivery.
Groww’s more than 46 crore shares traded on Tuesday. However, a mere 8.24 crore were available for delivery.
3. Groww sees profitbooking and market cap falls
As a result of this, the Groww share price has seen significant value erosion. The shares had risen as much as 94% from the issue price. The IPO price band for Groww was fixed at Rs 100 per share and it listed at Rs 112 per share on NSE. There after it surged almost 94% from the issue price levels over the next few sessions. As market veteran Arun Kejriwal rightly pointed out, beyond the initial euphoria, the market is looking for value, “But now questions are being raised about valuation. So if you want to continue the good times, valuation has to be given a thought.”
4. Groww valuations and long-term prospects
The valuation of the Groww shares has been at the centre of discussion. Analysts have raised concerns about a bigger chunk of the Groww shares being available in the market “The real thing you will see once the anchor book opens up in a month. And in the next six months, when a huge number of people have bought the shares before listing. I mean, a lot of investors have bought at much higher levels. I think the last deal that happened was around level Rs 135 (higher than the issue price). So there would be selling coming in from all these people going ahead,” warned Ambareesh Baliga.
According to him, “Valuations are anyway expensive, so I expect it to correct. Today, anyway, because of the restrictions, it has been corrected. But this is more technical. But fundamentally too, if you compare with any other player in the market.”
5. Groww results on November 21
The other key factor that investors are cautious about is the Groww quarterly numbers. They are scheduled to be released on November 21. After the disappointing Q2 results of LG Electronics after the stellar listing, investors are cautious ahead of the numbers.
What should investors do next
Commenting on what should be the next move for investors, Ajit Mishra, Senior Vice President of Research at Religare Broking, said that investors are advised not to jump into any stock just because it’s trading in positive or negative territory. If you’re trading in high beta counters, then you must have an exit plan, because sooner or later the rally comes to a stop, which could lead to massive losses. That’s why traders and investors need to have an exit plan ready in hand before jumping in.