The current market scenario, when the market yields and the risk-free rates are going up, may not be ideal for new-age tech companies said market veteran and Head of Research- Institutional Equities, Systematix Shares, Dhananjay Sinha in an interview with ET Now.
On being asked about the new age tech companies, Sinha said: "The markets have been pricing in a certain amount of easing as far as the liquidity crunch is concerned, and in the context where the outlook presages continued tightening of rates, valuations can further erode at this juncture."
"We still need to look at the visibility in earnings and where the market yields and the risk-free rates are going up. It would be a weakish scenario for such companies."
Sinha said unless there is good visibility in the normal and steady businesses, the companies that are in niche businesses and are a nascent sort of industry, structurally will do much better later two or three years down the line.
However, in the interim, if conventional consumer businesses are struggling to conserve their profitability, new-age tech businesses will also be facing pressure on profitability and return ratio.
"If the conventional consumer businesses are struggling in terms of conserving their profitability, these businesses will also be facing sort of question mark in terms of profitability and return ratio and they will be far more vulnerable to what happens to the valuation with respect to the risk-free rate, etc.," Sinha told ET.
Year-to-date, shares of new-age tech firms such as Paytm (down 52%), Zomato (down 52%) and Policybazaar (down 59%) have suffered strong losses.
Disclaimer: This article is based on an ET Now interview, published by economictimes.com. The views and recommendations given in this article are those of the analyst. These do not represent the views of MintGenie.
