New Delhi. The stormy rally that had been going on since the listing of the shares of BillionBrains Garage Ventures, the parent company of digital broking platform Groww, came to a halt today. Intra day, Grow shares fell to Rs 169.89 with a lower circuit of 10 per cent. The listing of Grow shares took place on 12 November. It jumped 94 per cent from the IPO price in five trading sessions and surprised investors by hitting a high of ₹193.91 on Tuesday. But today investors started booking profits vigorously and the result was that the stock fell face down.
Groww shares were listed on BSE at ₹114 with a premium of 14%. After the listing, there was continuous demand and the company’s shares gave almost 94% returns in just five trading sessions. The ever-growing user base of the digital broking platform, growth in revenue and high growth prospects of the fintech sector attracted investors towards the stock. Many fund houses and institutional investors also showed huge interest during the IPO.
Is the rally over?
According to a report by Moneycontrol, market analysts say that after the sharp rally in GRO shares, this decline is a natural and technically healthy correction. Market analyst Nitin Jain (Bonanza) said that the valuation of Groww has now reached above that of many old and established broking giants. Groww’s P/E during IPO was around 33–37x. But now it is trading at 61x, which is much higher than companies like Motilal Oswal (29x), Angel One (33x), Nuvama (26x) and IIFL Wealth. Seeing the high valuation and sharp rally, many investors chose the path of profit booking, the effect of which was directly visible on the stock.
Groww’s market cap has crossed the ₹1 lakh crore mark, which is higher than many old and listed capital market players. Groww’s valuation is based on digital scale, large user base and potential for new products in the future. Growth investors are paying a premium to it, but value investors should remain cautious at current levels. Analysts at Master Capital Services recently said that SEBI’s new policies and regulatory changes may bring some challenges for the brokerage industry in the near future. However, from a long-term perspective, he considers increasing retail participation in Indian financial markets as a big opportunity.
Should you sell GRO shares?
Shivani Nyati of Swastika Investmart says that despite strong growth, high valuations, margin pressure and regulatory risks in the fintech sector have made some investors cautious. Many investors can secure profits by booking partial profits after IPO allotment. According to him, investors who still hold shares can hold them for medium and long term but should keep a stoploss of ₹80.
Is the decline a buying opportunity?
Prashant Tapse of Mehta Equities believes that investors who did not get shares in the IPO can include Grow shares in their portfolio by adopting the ‘buy on dips’ strategy. Taapsee said that Grow’s business model is strong and the boom in digital investing in India can take it to greater heights. “Allotted investors should hold for the long term.”
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