Bearish Market Curbs New-Age Tech Stocks’ Enthusiasm 

It was a week to forget for all new-age tech stocks in India, with just Honasa surviving the broad market-wide slowdown that hit smallcap stocks the hardest.

Overall, the small and midcap market has declined 18.4% from peak levels and is close to the 20% drop mark, which would put these stocks in a bear market. In fact, between February 10 and February 14, the Indian broader market saw its worst fall since the Covid-hit week of March 20 in 2020.

Within the tech stocks ecosystem, the downturn was fuelled by slowing earnings growth for many of the marquee stocks, lingering concerns over stretched valuations for newly-listed companies, as well concerns over US-India trade relations, where the sword of tariffs is dangling over investors.

Among Indian new-age tech companies, fintech stocks Fino and Veefin were the worst hit. Incidentally, this past week, Veefin announced picking up a controlling stake of 49% in digital marketing agency White Rivers Media for INR 166.6 Cr.

SaaS companies Zaggle, Unicommerce and TAC Security were among the other top losers this week among Indian new-age tech stocks, shedding more than 20% in the bloodbath.

Honasa was the only listed company to show a gain on a week-on-week basis, despite lukewarm financial performance in Q3.

It’s no wonder then that a lot of the foreign portfolio investors have turned their focus to the US market, where there is renewed breadth after Donald Trump took over as the President. In India, the relentless foreign investor selling was not aided by the fact that marquee stocks such as Swiggy, Ola Electric, Firstcry, Unicommerce, among others, hit their expiry windows for the post-IPO lock-in periods.

According to data compiled by Nuvama Alternative & Quantitative Research, this is India’s biggest lock-up expiry in recent months. The expiries come amid a continued rush of IPOs, with SEBI currently processing more than 60 applications.

This despite the stock market not being kind to companies that fall into the narrative of a slowing economy and less-than-impressive earnings growth. Brokerages and research analysts believe that more than the pressure from potential geopolitical moves, the market is reacting to business fundamentals worsening.

Geojit Financial Services’ Vinod Nair, for instance, said, “Risk-averse sentiment continues to rule investor minds as corporate earnings are significantly lower than market expectations during the start of the year, especially for mid and smallcap companies. Muted earnings trend, rupee depreciation, and external factors like US tariffs are expected to keep the sentiment weak in the near term, which may further push FPIs outflows.”

Nair added that volatility is expected to stay elevated until there is clarity on US tariffs. No signs of that happening in the past week, as Trump looked to firm up plans for reciprocal tariffs on India, because of the high tariffs on imports into India from the US.

Other analysts believe this was a signal for investors to pull money out of the Indian primary market. As reported in the Business Standard this week, Elara Capital reckons that the Indian market breadth cycle expansion seems to have hit a peak, which will typically be followed by a period of contraction.

Trading activity is likely to tilt towards index heavyweights and large cap stocks, which does not make for good reading for new-age tech stocks or indeed startup public listings.

Thus far, India was seeing massive breadth cycle expansion, which means more stocks were increasing in value than decreasing. This is now reversing, Elara Capital contends, with the US now bouncing back for the first time in five years.

It’s very likely that the global asset allocators will review their India allocations and adjust to this breadth cycle expansion in the US, which is a trickle down effect of Trump’s tariff wars and the high liquidity in larger stocks in the US.

Gainers & Losers: Honasa Bucks The Trend

Among the bloodbath in the wider market, Honasa seems to have somehow come out unscathed. The company ended five out of the last seven trading sessions below the opening price, but finished this week with a minor 5% gain, the only stock to finish higher than the opening on Monday, February 10.

What’s surprising is that the company reported a flat profit in Q3 FY25 at INR 26.02 Cr compared to INR 25.90 Cr in the year-ago quarter. However, operating revenue rose 6% to INR 517.51 Cr, which seems to have given investors confidence about a big uptick in profitability coming soon.

Even sequentially, Honasa’s revenue from operations rose 12% from INR 461.82 Cr.

Incidentally, Honasa had hit its all-time low just before the Q3 results, as the company faced questions from the All India Consumer Products Distributors Federation (AICPDF) in November, which has had some impact on the brand reputation.

Despite a slide in EBITDA, the Mamaearth parent company claims to be back on a “growth trajectory” with a “gradual” scale up in general trend.

Brokerage Corner: Green Light For Nykaa 

Shares of Nykaa could see a rally in the coming week after brokerages cheered the beauty retailer’s  strong Q3 performance. JM Financial retained a ‘BUY’ rating on the stock with a target price of INR 240 and an upside potential of 42%. “Nykaa’s ability to deliver robust growth in a tepid demand environment demonstrates its differentiated market positioning,” the research note said.

The Falguni Nayar-led company reported a 51% year-on-year jump in its consolidated net profit at INR 26.4 Cr in the December quarter of the fiscal year 2024-25 as compared to INR 17.5 Cr in the year-ago quarter. Sequentially, Nykaa’s profit zoomed 104% from INR 12.97 Cr.

Revenue from operations surged 26.74% to INR 2,267.21 Cr in Q3 FY25 from INR 1,788.80 Cr in the corresponding quarter last year.

“Despite the unfavourable demand environment recently, Nykaa has delivered against the odds to improve margins while delivering growth in mid-twenties. We lower profitability improvement in core BPC while building a sharper improvement in fashion,” said JM Financial.

Markets Roundup: IPO Watch & Top Stories 

• DevX’s DRHP Sent Back: Market regulator Securities and Exchanges Board of India (SEBI) has returned the draft red herring prospectus (DRHP) of managed office space provider DevX without stating the reason
• Zaggle Promoters Up Stake: Zaggle CEO Avinash Godkhindi, executive chairman Raj Narayanam and other promoters have increased their stake to 44.03% by purchasing shares from the open market
• Zetwerk Pushes Ahead: B2B manufacturing unicorn Zetwerk is reportedly looking to file draft papers for a $400-500 Mn IPO in the next week, with Axis Bank, Goldman Sachs, and Kotak Mahindra appointed as bankers for the issue