Dear Reader,
The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.
The Paytm IPO train wreck is showing no signs of a salvage in sight. At 1pm today, the stock was down by 14 percent over Thursday’s close when it had listed, a day when its price declined by 27 percent over the IPO price. Yesterday, the company announced its results date and also released a monthly business update for October which showed growth in several metrics such as monthly transacting users, gross merchandise value and loans given. But even that does not seem to have any effect on its IPO allottee investors who are (presumably) selling their holdings.
But it’s not just Paytm that’s facing the heat today in the listed startup space. Policybazaar is down by 8 percent and Zomato is down by 7 percent. Nykaa is still standing relatively firm, with only a marginal loss. Are investors suddenly becoming more rational? Or, are Indian markets not ready for the long runway of losses that startups taxi through before they take off, the reason why some startups want to go overseas to list? Have investment bankers not done enough to convince startups or selling shareholders to leave more money on the IPO table?
While these are questions for which answers should become known in time, one reason for the pullback could be broader. A selloff is visible in the broad market, with the Sensex down by 1.5 percent and mid and small-cap indices have fallen by much more.
The concerns facing investors are not new, such as inflation, inevitable monetary tightening approaching near— in India and the West, the reality check provided by the earnings’ season and China’s slowing economy. Therefore, it’s not clear why in recent days there has been a sell-off of sorts. At such times when jittery fingers hover over the sell button, riskier assets could feel the heat and maybe that’s why startup stocks are being sold.
On interest rates, Ruchir Sharma, Morgan Stanley’s chief global strategist, writes on why long-term interest rates are not budging despite inflation trending up. He believes that the huge indebtedness of nations itself may be a reason for interest rates being kept low. This is free to read for Pro subscribers, as part of a special arrangement with the Financial Times.
One drawback from India on the macro side was that the government has walked back from its proposed agriculture sector reforms. In today’s edition, we write how these reforms could have, “in the aggregate, raise(d) farm incomes substantially and enable(d) India to move up from being a low middle income country”. But the mistake lay in not spending enough time in explaining their benefits to farmers and winning their confidence.
That sounds similar to Paytm’s plight. It managed to pull off a successful IPO at a very good price, but it has not been able to convince the broad investor community of the remaining potential in its valuation.
Investing insights from our research team:
Oil and gas: Price rally is not over
What makes Repco Home Finance a worthy bet despite lack of growth?
Sapphire Foods India: Does it have the right ingredients for shareholder value?
What else are we reading today?
RBI proposals on digital lending shine spotlight on consumer protection
Clearing the financial runway for airlines to take off
The Eastern Window | It’s time India joined others in raising human rights issue in China
Kubota’s Escorts deal set to shake up India’s agri-machinery market
Technical Picks: MGL, Asian Paints, ICICI Bank and Canara Bank
(These are published every trading day before markets open)Ravi AnanthanarayananMoneycontrol Pro
