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Market correction rattles IPOs as stocks listed in 2021 trade 10-50% below their highs

Apart from Omicron worries and central banks tightening, high valuations or run-up ahead of fundamentals is the major cause behind the correction not only in the market but also in stocks

December 29, 2021 / 12:33 PM IST
Representative image

Representative image


The year 2021 turned out to be very strong for the primary market, backed by robust secondary market environment, but the recent correction in the market, seen for a couple of months now, has dampened the sentiment as several listed stocks traded 10-50 percent lower from their highs.


The Nifty50 corrected more than 11 percent from its record high of 18,604 (touched October 19) before the current recovery of 5 percent from recent lows. This correction was warranted especially after a one-way run for more than 18 months creating market expensive compared to global peers. Omicron fears and rising expectations for rate hikes in the US caused the reversal in the market trend.


The year saw 65 IPOs being launched and 62 of them have so far been listed on the bourses. Many of them created multibagger returns in their journey this year, but all of them are now trading below their highs.


Suryoday Small Finance Bank and CarTrade Tech were the biggest losers, falling around 50 percent each from their highs. In addition, both stocks are also down around 50 percent each from their issue prices.


Paras Defence and Space Technologies also lost more than 45 percent from its highest point, but it remained the top multibagger among IPOs, giving 292 percent returns from the issue price. Indigo Paints, Windlas Biotech, Krsnaa Diagnostics and Antony Waste Handling Cell lost more than 40 percent gains from their highs.

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Data indicated that 33 stocks fell more than 20 percent from their highs. Nureca and Laxmi Organic Industries, the second and third largest multibaggers among the IPOs, fell 39 percent and 37 percent from their highs. However, their gains are 253 percent and 205 percent, compared to the issue price.


Sigachi Industries and Barbeque-Nation Hospitality also corrected more than 35 percent from highs, but they are still up 144 percent each from issue price.


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Apart from Omicron worries and central banks tightening, high valuations or run-up ahead of fundamentals is the major cause behind the correction not only in the market but also in stocks.


Also read - IPO fireworks in New Year too; companies likely to garner Rs 1.5 lakh crore through initial share sales


“We need to realise that IPO investing is risky, and most companies go public at high valuations. In today’s market, where there has been a 10 percent correction in the market and uncertainty around the market prospects due to Omicron and rates increasing worldwide, the risky assets are suffering across the market, and IPOs are one such asset class,” said Sonam Srivastava, Founder of Wright Research.


Experts largely believe the companies having strong fundamentals and reaching at reasonable valuations are bound to see strong recovery going ahead, while others may remain around or below issue price.


Generally, the companies having robust growth track record and potential are always on the buyer’s radar.


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“We are honestly waiting for a market rebound to get a clearer picture. We expect the more attractive companies from a valuation and growth perspective to rebound from the drawdown quickly, while others that do not look too attractive will stay volatile. Nazara Technologies, Paras Defence, Zomato, Nykaa are some desirable names in this list that investors could watch,” said Sonam Srivastava.


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On the other side, Anupam Rasayan India, Medplus Health Services, Krishna Institute of Medical Sciences, Anand Rathi Wealth, Brookfield India REIT, Metro Brands, MTAR Technologies, RateGain Travel Technologies, CE Info Systems (MapmyIndia), Clean Science & Technology, and Rolex Rings are the outperformers among the IPOs listed so far in 2021, as they fell just 1-10 percent from their highs but all of them, barring Metro Brands & Rategain, traded higher than their issue prices.


Also read - Supriya Lifescience lists with 55% premium, should investors hold or book profit?

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Sunil Shankar Matkar
first published: Dec 29, 2021 08:51 am
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