New-Age Tech Stocks Bleed As Covid Fears Re-emerge; EaseMyTrip Worst Hit This Week

Indian new-age tech stocks plunged significantly this week as the overall stock market also fell on a spike in Covid-19 infections in China and many other countries. 

The fears of rise in Covid cases added to the woes of the listed tech startups which have been under pressure throughout the year on the stock exchanges. All the stocks under our coverage fell 4%-18% this week, with traveltech startup EaseMyTrip being the biggest loser. 

On the BSE, Zomato (down over 13%), Nykaa (down about 14%), Tracxn Technologies (down almost 12%), Paytm (down about 10%), and Cartrade Technologies (down over 11%) were among the stocks which took big hits. 

While business-specific events led to the decline in some stocks, the downfall was largely based on the broader market trend as investors moved to safe havens. 

Despite the bloodbath, drone startup DroneAcharya Aerial Innovations listed on the BSE SME platform at almost a 90% premium to its issue price on Friday. Shares of the drone startup rose further in the day, ending 5% higher from its listing price at INR 107.1.

Meanwhile, benchmark indices Nifty50 and Sensex fell straight in the last four sessions this week. While Nifty50 ended Friday’s session 1.77% lower from the previous close at 17,806.80, Sensex fell 1.61% to 59,845.29. 

On a weekly basis, Nifty50 and Sensex were down 2.53% and 2.43%, respectively.

“Domestic equity markets corrected this week reacting to negative global cues. Most sectors reported negative returns this week due to broader weakness in the markets. Covid case count in China and concern about possible recession will continue to influence the global equity market in the near term,” said Shrikant Chouhan, head of equity research (retail) at Kotak Securities.

Amol Athawale, deputy vice president, technical research at Kotak Securities, said that besides the spurt in Covid cases in China and Japan, the better-than-expected US Q3 GDP numbers have further raised concerns that the US Fed might go for more rate hikes to tame inflation, which accentuated selling pressure in the markets.

Now, let’s take a deeper look at the weekly performance of some of the listed new-age tech stocks from the Indian startup ecosystem.

The 12 new-age tech stocks under our coverage ended this week with a total market capitalisation of $23.55 Bn as against $25.78 Bn last week and $27.36 Bn a week before that.

Nykaa Hits New Record Lows In All 5 Sessions

Shares of beauty ecommerce giant Nykaa continued their losing streak, which began last week after Kravis Investment Partners sold its stake worth INR 629 Cr in the company. 

Shares of Nykaa fell in all five sessions this week, hitting new record lows every day. On Friday, Nykaa plunged as much as 8% to touch a new all-time low at INR 139.35. However, it recouped some of the losses to end Friday’s session at INR 144.75, down 4.5% from Thursday’s close.

Overall, the stock fell about 14% this week. It must be noted Nykaa has lost almost 63% in its market cap year-to-date (YTD). Its market cap currently stands at $4.98 Bn as against $13.36 Bn on December 31, 2022. 

Nykaa is facing selling pressure at higher levels and is consistently trading below 20-day simple moving average, so the texture definitely remains weak, said Kotak Securities’ Athawale. 

“There is no sign of reversal for the stock. For the pullback, INR 150 would be the immediate level to watch out for. If the stock trades above INR 150, then we can expect a minor pullback rally till INR 155 and INR 160,” he said. 

“On the flip side, INR 140 and INR 135 would be the immediate support zone for the stock,” said Athawale, adding that the stock is in the oversold category on the intraday chart and this may result in a temporary bounce back.

Echoing a similar view, Ganesh Dongre, senior manager and technical research analyst at Anand Rathi, said that there aren’t sufficient signs to go long on Nykaa till the counter crosses the INR 170-INR 175 zone.

EaseMyTrip Shares The Biggest Loser

As expected, the reports of a resurgence in Covid-19 cases had the biggest impact on traveltech company EaseMyTrip. Besides, a snowstorm in the US could also be a probable and immediate reason for its shares slumping this week as it might temporarily disrupt the festive travel in the country.

Shares of EaseMyTrip fell almost 18% this week. The shares started falling from Tuesday and fell straight in the next three sessions. On Friday alone, EaseMyTrip shares slumped 10.9%, ending the week at INR 45.60 on the BSE.

EaseMyTrip is among the few startups whose share price rose amidst the bloodbath in its tech peers this year. The startup’s market cap has risen 21.5% YTD to around $950 Mn.

Speaking about the stock’s current performance, Athawale opined that it has formed a lower top formation.

“The direction is still into the bearish side and an immediate pullback rally is possible if the stock succeeds to close above INR 50,” said Athawale, adding that as long as it is trading below the level, the weak texture is likely to continue. On the lower side INR 44-INR 43 is possible, he said.

Jefferies Drops Zomato From Its India Portfolio

International brokerage Jefferies dropped foodtech giant Zomato from its Indian portfolio this week on the back of increasing competition in the sector, in contrast to the brokerage’s earlier bullish stance on the stock.

Shares of Zomato fell significantly in three straight sessions this week, ending Friday at INR 53.6 on the BSE. On Friday alone, the shares were down 9% compared to the previous day’s close. Overall, the stock fell over 13% this week.

In the recent changes to its model portfolio, Jefferies said that it is “incrementally wary” of a potential rise in competitive activity in food delivery sector as Zomato’s chief competitor Swiggy has recently seen market share loss.

However, after Prosus’ half-yearly financial report last month, Jefferies had noted that despite the aggressive competition from Swiggy, Zomato was clearly dominant in the market.

Zomato has been under pressure this year, with its share price plunging over 60% YTD. Factors like concerns about competition and profitability and the overall uncertain macroeconomic environment led to this downfall.

“A fresh pullback is possible only after INR 57-INR 58 resistance breakout. But on the lower side, if the selling pressure continues, then the stock could slip till INR 51-INR 55,” Athawale said about Zomato.

Anand Rathi’s Dongre also believes that investors should avoid going long on the counter and wait for the stock to come to INR 45-INR 47 levels.