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In the span of 2020 to 2021, the unlisted share market experienced a notable upswing, presenting favorable conditions for investors.However, as we approached the end of 2021, a shift occurred, and the unlisted share market began to experience a correction phase. This correction was triggered by the disappointing listings of several new age companies, causing a ripple effect across the market. The situation further intensified with the eruption of the Russia-Ukraine war, creating additional uncertainties and challenges. As a result, the volumes of unlisted shares dwindled significantly, leaving a noticeable impact on the overall market sentiment. The number of companies venturing towards initial public offerings (IPOs) also decreased, further dampening the unlisted stock market’s performance. However, amidst this dim phase, there is a glimmer of hope. As the broader market gradually stabilizes, signs of a rebound are emerging in the unlisted share market. Join us as we delve into the intricacies of this journey and explore the resurgence of the unlisted market, bringing back the excitement and potential that investors eagerly anticipate.
Unraveling the Correction: Exploring Catalysts and Factors Behind the Unlisted Share Market Correction
- Overheated Valuations and Risk-Reward Imbalance: During the bull run of 2020-21, unlisted stocks outperformed the broader market, resulting in soaring valuations. However, these high valuations created an unfavorable risk-reward scenario, prompting a correction.
- Disappointing Startup IPO Listings: The market was shaken by the disappointing listings of startup IPOs. This sent ripples through the Pre-IPO market, contributing to the overall nervousness and subsequent correction.
- Euphoria Fades for New Age Companies: The initial euphoria surrounding new age companies evaporated, leading to a correction in both newly listed companies and unlisted new age companies. Investors reassessed their expectations, causing a revaluation of these stocks.
- Impact of COVID-19 on NBFCs and Microfinance Companies: The NBFC (Non-Banking Financial Companies) and microfinance sectors were heavily affected post-COVID. Unlisted NBFCs and microfinance companies faced the heat, as economic uncertainties and financial strains impacted their operations.
- Uncertainty Intensified by the Russia-Ukraine War: The broader market was hit by increased uncertainty due to the Russia-Ukraine war. Geopolitical tensions and global market volatility intensified the ongoing correction, further shaking investor confidence.
- Influence of Rising Interest Rates: The market correction was also influenced by rising interest rates. As interest rates increased, borrowing costs rose for companies, impacting their profitability and investor sentiment.
Promising Signs of Recovery and Renewed Investor Enthusiasm
After a prolonged period of correction, there are promising signs of recovery in the unlisted market, coinciding with the stabilization of the broader market. While new age companies continue to face pressure, traditional businesses with reputable parentage have been witnessing renewed investor interest.
Hero Fincorp, the NBFC arm of Hero Motocorp, which saw a significant surge in its stock price, climbing from Rs. 750 to Rs. 1050 within a short span. The company recently posted decent results. Hero Fincorp’s unlisted shares soar by an impressive 40% in just a couple of months, indicating a notable resurgence and heightened investor interest in the unlisted market.
After a substantial correction, Reliance Retail’s unlisted shares have garnered significant buying interest, mirroring a similar trend observed in its ultimate holding company, Reliance Industries, in the secondary market. Reliance Retail’s unlisted shares have experienced an impressive surge, climbing to nearly Rs. 2350 from its recent lows around Rs. 2150. Within just a couple of days, the shares of Reliance Retail have surged by approximately 10%, reflecting renewed investor enthusiasm and confidence in the company.
Motilal Oswal Home Finance, a subsidiary of Motilal Oswal Financial Services Limited, experienced a significant upswing as its rate surged from Rs 8 to Rs 12, marking an impressive climb of nearly 50% within a span of just one month.
Tata Technologies’ shares have displayed exceptional performance, surpassing both the listed and unlisted markets. With an extraordinary reward of nearly 800% in just two years, this growth is regarded as historic. Maintaining its momentum, Tata Technologies’ shares are currently trading strongly above Rs. 800 levels, following the news of its IPO. The stock’s impressive trading volumes further indicate the significant investor interest and confidence in the company’s future prospects.
Additionally, Ixigo Unlisted Shares, which was initially trading at Rs 70, has scaled up to Rs 94. HDB Financial Services Unlisted Shares also enjoyed a positive movement, with its rate increasing from Rs 615 to Rs 655. Noteworthy mention includes Sterlite Power Transmission Unlisted Shares which are steadily inching up, accompanied by high volumes.
Despite the under performance of poster boys of the unlisted share market like Chennai Super Kings, B9 Beverages, and API Holdings, trading volumes have surged significantly. This indicates heightened investor participation and interest in these companies.
The rise in the NBFC and home finance sectors can be attributed to their strong financial results or positive expectations regarding future performance, as the adverse effects of the COVID-19 pandemic on their provisions are gradually subsiding. Notably, companies like Tata Technologies have already filed their IPO DRHP (Draft Red Herring Prospectus), capturing the attention and interest of investors.
The emerging signs of recovery and renewed investor enthusiasm in the unlisted market present an opportunity for investors to consider the potential growth and value in these companies. With positive movements observed in various sectors, it is crucial to stay updated on the latest developments and analyze the performance and prospects of each company before making investment decisions.
By closely monitoring the market and keeping a watchful eye on the evolving trends, investors can position themselves to capitalize on the recovering unlisted market and potentially reap the rewards of renewed investor optimism.
Disclaimer: The information provided in this content is for informational purposes only and should not be construed as financial or investment advice. Investing in unlisted stocks involves risks, and individuals should carefully evaluate their own financial situation and consult with a professional advisor before making any investment decisions. The mentioned performance figures and market trends are based on historical data and should not be considered as guarantees of future results. The stock market is subject to fluctuations, and past performance may not necessarily indicate future performance. The mentioned companies and their stock prices are for illustrative purposes only and do not constitute specific investment recommendations. Always conduct thorough research and exercise due diligence before investing in any securities.
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