How global market impacted the share price of financial companies like Paytm and LIC

Prominent new-age technology companies around the globe have faced the brunt of the economic downturn triggered by tighter central bank policies, registering an almost 20-70% drop in their share prices this year. From Affirm Holdings down nearly 80%, PayPal down 58% to Google taking a hit of over 35%, all have seen a downturn from their respective peaks this year.

While India has remained largely unscathed amid fears of a looming global recession, wide scale volatility has been a major worry for investors and this has directly affected the share price of some major companies like LIC, Zomato, PB Fintech, Nykaa, Paytm that got listed fairly recently. Even the companies that enjoyed a strong listing in the stock market last year – backed by liquidity-driven euphoria – have seen their share price plummet over 50% and continue to reel under pressure.

It is especially during such times that the importance of a strong business model comes to fore. Though companies like Nykaa, and Paytm among others have faced the heat, they give hopes to the investors for staying put long term largely owning to their robust business models. If any company demonstrates strong business fundamentals and consistently registers robust financial growth every quarter, investors should not worry about short-term fall in share price value and look at the bigger picture, especially in the case of new-age technology companies.

Similarly, the Life Insurance Corporation of India (LIC) also received an underwhelming response from investors despite being the most popular insurance company in the country and been around since decades.

It is, therefore, important to note that companies like Paytm & LIC who are leaders in their respective businesses are likely to keep growing with stronger adoption of services. Some of the top global brokerages believe that new-age technology companies, especially in the fintech domain, will see rapid growth in coming years with growing demand for online payments and financial services. While shares of most new-age fintech companies are down across the world and in India, they continue to serve a unique and important purpose in the lives of people, thus creating value every second. In India, Goldman Sachs has even added Paytm stock to its conviction list and said that “Paytm is one of the most compelling growth stories at an attractive valuation”.

Investors should note that fall in the share prices of some major companies is not related to their growth potential, but rather an impact of global market volatility, triggered by multiple factors. In such a scenario, it makes sense to evaluate companies on the basis of parameters like revenue, cash flow and business model.