New-age stocks such as Paytm and Nykaa will likely witness high volatility in the next few weeks as many shares held by investors, including promoters, in these companies will become eligible for trading before November 24.
Investors in newly-listed companies are not allowed to sell their shares for a particular period. This lock-in period is usually one year for institutional investors, expiring in some startups listed last year.
This restriction in FSN Ecommerce (Nykaa) Nykaa will be removed on November 10, while in PB Fintech (PolicyBazaar), the date is November 15. In One 97 Communications (Paytm) and Delhivery, the curb will be lifted on November 18 and 24, respectively.
While some brokerages have advised investors to keep strict stop-losses and avoid fresh buying, others see it as a chance to accumulate at low levels.
Institutional investors and promoters may look to sell a part of their stake when their holdings become eligible for trade. If they resort to selling their shares, it will impact the sentiment. An intense selling would be considered a reflection of waning confidence in the company. If promoters hold on to their stake, these stocks will witness good buying support.
Many startups hit the capital market last year with fanfare. But these new-age stocks were continuously hammered in the market, much to the disappointment of retail investors.
For example, Nykaa is trading at the Rs 1,139 level on the BSE, far below its 52-week high of Rs 2,574 recorded in November last year. Ditto for Paytm is trading at Rs 642 level, whereas its 52-week high is Rs 1,961.
High IPO valuations, obscure business models and ambiguous revenue streams have been cited as the reasons for a sharp correction in the new-age stocks.
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