Bhakti MakwanaJan 28, 2022, 07:00 IST
Most of the new age technology companies or rather popular consumer brands like Paytm, Zomato, Nykaa have nothing but disappointed IPO investors.Shares of new age tech companies like Paytm, Zomato, Nykaa and Policybazaar have witnessed huge sell-off since its listing and especially in the last one month. The recent slump in such stocks is because of overall weakness in the global and domestic markets due to fear of US Fed hiking interest rates sooner. However, these companies have been disappointing investors since their listing because as a matter of fact most of these firms are not financially strong and in losses.
After a huge sell off in these stocks, the trending question is ‘Is this the right time to invest in such battered stocks?’.
|New age tech companies||% change from issue price||Year-to-date fall|
Advertisement“Finding attractive valuations in some of the loss-making tech stocks [like Zomato] is like ‘Five blind men trying to identify elephants,” says Nilesh Shah, managing director at Kotak Asset Management. Businesses like Zomato require a lot of capital infusion despite not making profits. “You know there were 700 odd food distribution companies including UberEats and Amazon, today only a handful of them survived. Second, for survival, you require access to capital. Many of the disruptor startups are burning capital to build a business model. These businesses have longer paths to profitability and they also change quite rapidly for a variety of factors. So you have to be mentally prepared for investment on a longer term basis,” said Shah. To investors willing to enter the stock at the current levels, Shah says that, “You will have to be ready for higher volatility in these stocks. They will all test your conviction but if you play contra, (which is) not get carried away when prices are rising and not get depressed when prices are falling, that is probably the only way to make money in these stocks.”
So the point is to not get excited and not put a lot of investment in this space.Experts suggest investors to not put all eggs in one basket and rather diversify their portfolio. “Be conscious about your investing. Don’t drift into things that you hear one tip from a friend or Whatsapp group or even TV and then you buy one and another. Basic thing (to know) is how companies and sectors you have in your portfolio, even if you have 15 companies and 7 are banks and 5 are FMCG [fast moving consumer goods], you don’t really have diversification. So, first know where you are and make a conscious decision where you want to be,” said Devina Mehra, chairperson and managing director (MD) at First Global.
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