Zomato, Paytm, Nykaa, Policybazaar, and other new-age internet companies were witnessing some strong selling pressure on Dalal Street on Monday. Foreign investors pulling funds out, concern over faster than expected US Federal Reserve policy tightening, and a global sell-off in tech stocks is aiding the worst rout seen by these new-age platform companies since those got listed in recent quarters. While Paytm’s stock price has largely only seen bearish movement on Dalal Street, all others have had their fair share of bulls; but all witnessed heavy correction today.
Funds moving away from technology sector
The fall in domestic technology names comes at a time when foreign investors can be spotted moving funds. “Rally in IT/Technology stocks across the globe is coming to an end and funds are moving towards banking, auto, and power sector,” Vishal Wagh, Head of Research Bonanza Portfolio said. FPI data available on NSDL shows that foreign investors have been net buyers of the banking, auto, and power sectors in the first 15 days of the current year.
Zomato, the food-tech behemoth that listed on the stock exchanges in July last year has tanked 33% since the year began. The stock tanked 20% to hit a 52-week low of Rs 91.7 per share. Paytm hit a new low of Rs 881.5 per share, falling more than 8%. Nykaa share price tanked more than 12% to hit a low of Rs 1,740.05 per share. Shares of PB Fintech (PolicyBazaar) were down 11.4% to hit a new 52-week low of Rs 766 apiece.
US tech rout, premium valuations weigh in on domestic internet stocks
Another factor hitting technology names is the rout seen in US internet companies. The trend in global stock markets has turned distinctly bearish. Last week S&P 500 and Nasdaq closed 8% and 15% below their all-time highs. The sell-off in tech stocks has been brutal last week,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “An important feature of the tech sell-off is that bulk of the selling is happening in non-profitable tech stocks. This trend is impacting stocks like Zomato and Paytm in India too,” he added.
Stocks of Zomato, Nykaa, and Policybazaar – all listed at premiums to their IPO prices. Shares have also enjoyed a decent run on Dalal Street, taking prices higher. Vishal Wagh added that these premium valuations of the new-age internet startups have also played the role of dampening spirits on Dalal Street.
Trading at new lows, should you buy?
After a sharp correction, a large number of internet stocks are now trading at new all-time lows after having erased massive investor wealth. However, Vishal Wagh is not keen on buying any of the stocks. He advises investors to look at the stocks if they regain their listing day levels, below which he says, the stocks may not sustain. On the other hand, Rahul Sharma, Co-owner, of Equity99 believes long-term investors can use this opportunity to buy these shares. “We see this as a good opportunity for long-term investors to add these counters at a considerable discount as they might be reporting losses now but have huge growth potential considering their business models,” he added.