Did market correction make new-age stocks value buys?

The recent bout of profit-booking has eased concerns surrounding valuations in the market. At the headline level, the benchmarks have corrected nearly 10 per cent from their record high levels while individual stocks have tumbled nearly 50 per cent from recent peaks.

Among these, shares of recently listed companies, especially from the digital space, have been the worst hit.

FSN E-Commerce Ventures (Nykaa), PB Fintech - the parent company of Policybazaar, Tega Industries, Tarsons Products, Aditya Birla Sun Life AMC, SJS Enterprises, Indigo Paints, Anand Rathi Wealth and Glenmark Lifesciences hit their respective lows since listing on December 20.
 

Further, 50 per cent of the companies listed in the past two months are trading below their issue price, including RateGain Travel and Technologies, Star Health and Allied Insurance, Paytm, and Policybazaar. 

And analysts say the worst may not be over for some of them yet.

G Chokkalingam, founder and chief investment officer at Equinomics Research, for instance, suggests investors should carefully analyse the business prospects of each of these companies before taking an investment decision. 
 

Gaurav Garg, head of research at CapitalVia, echoes a similar sentiment and says that the current market sentiments have put almost all the IPOs on backfoot and we have seen muted listings on most of them. I think in the current market situation, most of the blue-chip companies with strong balance sheets are available at decent valuations. Investors should look at buying them and can wait for a few quarters more to see the performance of recently listed companies.

The so-called hurried decision to hit the market by new-age companies followed a strong bull-run and a gush of liquidity in the markets.

According to an analysis by Kotak Mahindra Capital Company, the year 2021 saw the highest-ever IPO volumes in the country with the volumes surging to $15.3 billion, as against $4.2 billion in 2020.

That means the Street saw more IPOs in 2021 than in the year past three years combined, both in the number of listings and the amount raised. 

However, despite the current volatility and steps by central banks to escalate the process of liquidity withdrawal, the IPO frenzy is set to continue next year.

According to Kotak Mahindra Capital’s estimate, $26 billion worth of issues are in the pipeline from resilient sectors such as new-age tech, healthcare, consumer, realty and speciality chemicals issues.

While IPOs worth $15 billion have already been filed with the Sebi, issues worth $11 billion are likely to be filed near-term by several high-quality companies across large-caps and mid-caps.

While 2021 was huge for IPOs, we expect 2022 to be another good year. Nevertheless, investors should be cautious and not assume all IPOs to hit the bull’s eye, said V Jayasankar, whole-time director at the brokerage.

On Wednesday, Metro Brands joined the bandwagon of companies staging weak debut as the shares listed at a 13 per cent discount in a firm market. 

Against this backdrop, shares of newly-listed companies will be on investor radar. That apart, stock-specific news flow, weekly F&O expiry and general global trends will guide the markets