This article is more than 5 month old.

Zerodha CEO expresses shock at sharp drop in stock prices of new-age tech firms

Mini

New-age technology companies in India, which have enjoyed the benevolence of investors in the past few months, were at the forefront of the selling pressure in November-end.

Zerodha CEO expresses shock at sharp drop in stock prices of new-age tech firms

Zerodha founder and CEO Nithin Kamath, who often pokes fun at rival broking firms on social media, on Saturday expressed shock and fear at the sharp drop in share prices of listed new-age technology companies.

New-age technology companies in India that have enjoyed the benevolence of investors in the past few months were at the forefront of the selling pressure in November-end. According to Kamath, only a few companies are able to recuperate from such losses.

“The sharp drops in stock prices of listed new-age tech companies across the world is quite scary,” Kamath tweeted on Saturday morning, adding that companies should prioritise lower volatility in the long term against maximum short-term gain while making a growth forecast.

In a series of tweets, Kamath said the risks and impact of sharp drops on any business is much higher than those companies that witness price corrections gradually on the exchanges.

According to Kamath, core teams of new-age technology firms, including their founders, suffer from an anchoring bias and tie their net worth to employee stock ownership plan (ESOPS).

“It doesn’t matter how large the notional profits on stock holding, if price hits a peak and goes down, it feels like a loss,” he said.

The tweets come at a time when shares of Paytm’s parent firm One97 Communications were battered on the bourses after the lock-in period for anchor investors came to an end.

According to Kamath, the more a company stresses on higher prices in the short term, the higher the odds of large drops and volatility in the long term. This cannot bode well for either the team morale or the business at large, he said.

Alluding to a dialogue from the Bollywood movie Sarkar in which legendary actor Amitabh Bachchan says, "Nazdiki fayda dekhne se pehle, door ka nuksaan sochna chahiye (Before looking at short-term gains, we must look at long-term losses)," Kamath said it would be better if companies talked down prices than talking it up.

“Lower volatility in stock price is also maybe something companies should strive for, which is good for long term investors as well," he tweeted.

next story

Market Movers

Currency

CompanyPriceChng%Chng