Editor’s Note
Groww shares fell sharply today, hitting the 10% lower circuit limit. This drop coincides with a large block of shares entering the auction window. Market attention now turns to the company’s upcoming results and a key lock-in expiry next month.
Groww shares crashed 10% and were locked at the lower circuit. The main reason for this sharp decline is that over 30 lakh shares have entered the auction window. Investors are now focused on the results due on November 21 and the expiry of the lock-in period on December 10.
As soon as the market opened on Wednesday, selling pressure was seen in Groww’s shares. In no time, the stock price tumbled 10 percent to Rs 169.89. The fall was so sharp that the stock got stuck in the ‘lower circuit’. Lower circuit means that the stock cannot fall more than that for the day and only sellers remain in the market, while buyers disappear. This prevents selling in the stock because buyers are simply absent.
On Wednesday, the exchange also changed the ‘circuit limit’ for this stock. Previously, this limit was 20%, which has now been reduced to 10%. The direct impact of this will be that the stock will not see intraday fluctuations (ups or downs) of more than 10% within a day. This step is usually taken when there is a fear of high volatility in a stock.
Amid this decline, there is also a technical snag. According to a Moneycontrol report, nearly 30 lakh shares of Groww have gone into the NSE’s auction window. The question now arises: why did this happen?
In fact, many traders in the stock market engage in ‘short selling’. That is, they sell shares first, hoping that when the price falls, they will buy them back cheaply and square off their position. It appears that many traders short-sold Groww expecting it to fall, but when the time came for delivery, they could not arrange the shares. In simple terms, they sold goods they didn’t even have and couldn’t buy them on time. This is why the shares are now being auctioned to settle these deals, creating a chaotic atmosphere in the market.
If you are invested in this company or thinking of investing, you should note two dates on your calendar. The first date is November 21, when the company will announce its July-September quarterly results for the current financial year. This will be the company’s first ‘report card’ post-listing, which will reveal how much the company is actually earning.
But an even bigger and riskier date is December 10. According to market experts and brokerage firm Nuvama, the one-month ‘lock-in period’ for the company’s shares is ending on this day. As soon as this period ends, approximately 14.92 crore shares will become free for trading. This is about 2% of the company’s total equity. When such a large number of shares hit the market, if existing investors start profit booking, significant pressure could be seen on the stock price.
Despite all the bad news, one relief is that investors who got shares in the IPO are still sitting on decent profits. The company’s IPO came at a price of Rs 100, and despite today’s fall, the share is trading at Rs 169.89. That means it is still up nearly 70% from the IPO price.