Grey market stocks buck Sensex, Nifty mood

Stocks in the unlisted market are hitting the roof despite trading at premium valuations. These stocks saw no correction, which the listed equity market witnessed in recent days. Brokers say that in many cases, valuations are overstretched. 

These companies include heavyweights like HDFC Securities, Reliance Retail, Tata Technologies and even other companies like Merino Laminates that are still going strong without correction, say brokers in the unlisted market.

According to the price sheet of UnlistedZone, brokerage firm HDFC Securities is being traded at Rs 18,500 while the parent firm HDFC Bank has corrected over 2% in the last five trading sessions.

Merino Laminates has been consistently trading at Rs 4,000. Anticipating a hit auction of the two new IPL teams, Chennai Super Kings that traded at Rs 140 on October 20, rose to Rs 168 on October 25. After Monday’s auctions, the price further rose to Rs 215.

“People are willing to buy these companies at whatever price they want. Hence, there has not been much correction,” says Sunil Chandak, founder of Gennext Investrade, running with the website unlistedshares.in. 

While Tata Technologies has kept the momentum going even through last week, TCS shares have corrected over 3 per cent in one week.

Tata Technologies has been consistently trading at Rs 5,500 in the last week.

Umesh Paliwal, co-founder of UnlistedZone.com says this phenomenon and risk is more in the case of IPO-bound companies.

“People should invest at a discount price from the IPO and make some money. But if valuations are stretched it won’t help and there is more risk. Take Policybazaar for example. It is being traded as high as Rs 2,200 in the unlisted market but according to market expectations, the IPO price would be Rs 1,100 or maximum Rs 1,200. We advise people not to buy every IPO-bound company,” says Paliwal. 

He adds that this phenomenon of investing even when prices are overvalued is a recent one.

Another company he talks of with high valuations is Paytm. “It is being traded at around Rs 3,700 but the IPO price wasn’t expected above Rs 3,000. Investors should exercise caution,” he says. 

Even as the bull run continues, analysts say investors should be cautious.

“Stock prices of these companies have risen so steeply in the last one year that just like the Sensex and Nifty, one must expect a good correction. What the quantum would be of this correction, nobody can predict but it is sure to happen,” says Chandak.

Few weeks ago, Dinesh Gupta, one of the founders of UnlistedZone.com, had even written to investors cautioning them about overvalued stocks in the unlisted markets. 

“Valuations of most of the prominent unlisted shares have been too much stretched and it will break,” Gupta’s letter to investors read.