8 hrs ago
Internet Stocks Rally as MSCI Rejig Boosts IPO Activity
Internet-focused companies performed much better than the overall stock market during the month.
The Nifty India Internet index rose 8%, while the Nifty 50 declined 1.3%.
The IPO index also increased by 4%.
Some companies, including Urban Company, Paytm’s parent and PolicyBazaar’s parent, recorded large gains.
Changes to an MSCI index helped attract money to some companies such as Groww, Eternal and Swiggy.
August was the busiest month this year for large-company IPOs, with 22 offerings.
Analysts believe these businesses could grow over time, but many are not yet strongly profitable.
Their share prices are therefore considered expensive compared with their current earnings.
The Nifty India Internet index gained 8% in the 30 days to August 31, while the Nifty 50 fell 1.3% to 24,055.8.
The Nifty IPO index rose 4%, with Lenskart gaining 17.74% and holding the index’s largest 7% weighting.
Urban Company, One 97 Communications and PB Fintech advanced 29.84%, 21.63% and 14.22%, respectively.
August saw 22 mainboard IPOs raise Rs 21,730 crore, while July remained the highest-value month with Rs 28,648 crore raised.
Analysts remain positive on new-age companies but caution that high valuations and limited profitability require a long-term investment view.
- Who
- New-age internet companies, IPO-linked businesses, investors, analysts and index providers were involved.
- What
- The Nifty India Internet and Nifty IPO indices outperformed the broader Nifty 50, while IPO and offer-for-sale fundraising remained active.
- Where
- The developments concern India’s stock market and Indian companies.
- When
- The performance figures cover the 30-day period ending August 31; the article also reports fundraising through August.
- Why
- Internet stocks benefited from gains in key constituents, block deals and MSCI index changes that can trigger passive fund inflows.
Long-Term Growth Case
Valuation and Profitability Caution
Prospects for internet companies
Long-Term Growth Case
Analysts remain bullish on new-age businesses because of their long-term growth potential.
Valuation and Profitability Caution
Many companies in the Internet index have yet to deliver on profitability metrics, so investors are advised to take a long-term view.
High share-price valuations
Long-Term Growth Case
The high valuations reflect expectations that earnings can grow substantially over time.
Valuation and Profitability Caution
The Internet index’s 160x price-to-earnings multiple indicates that share prices are high relative to current earnings.
IPO index appeal
Long-Term Growth Case
The IPO index may offer a more attractive mix because financial-services and asset-management companies have more visible earnings and growth potential.
Valuation and Profitability Caution
Even the IPO index trades at a high 60x price-to-earnings multiple, showing that valuation remains an important consideration.
Key facts
- Nifty India Internet
- Closed at 1,458.4 after gaining 8% during the 30-day period ended August 31.
- Nifty 50
- Fell 1.3% to 24,055.8 over the period.
- Nifty IPO index
- Gained 4% and traded at a price-to-earnings multiple of 60x.
- Internet index valuation
- The Nifty India Internet index traded at a price-to-earnings multiple of 160x.
- Mainboard IPOs
- August recorded 22 issuances raising Rs 21,730 crore through fresh issues.
- Highest monthly IPO value
- July recorded Rs 28,648 crore through fresh issues.
- Offer-for-sale fundraising
- August saw Rs 31,446 crore raised through one issuance.
Sources
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