The spectacular rally in Groww’s shares following its IPO has now given way to turbulence, as the stock faced a sharp correction and a massive short delivery crisis. The episode highlights how limited free float and speculative trading can distort price discovery in newly listed companies.
The Rally That Sparked Frenzy
Groww’s parent company, Billionbrains Garage Ventures Ltd, debuted on the exchanges earlier this month at ₹100 per share. Within just five trading sessions, the stock surged nearly 94%, closing at ₹194. The meteoric rise was fueled by retail enthusiasm, limited supply of shares, and speculative bets.
However, the rally proved unsustainable. On November 19, Groww shares hit the 10% lower circuit, marking the first significant pullback since listing.
Anatomy of the Short Delivery Crisis
The crisis stemmed from the low free float available in the market. With only a small portion of shares open for trading, demand far outstripped supply. On November 18, over 46 crore shares were traded, but only 8.24 crore were marked for delivery, exposing the scale of speculative activity.
This mismatch created a short delivery situation, where sellers could not deliver the shares they had promised, leading to settlement challenges and heightened volatility.
Analysts Weigh In
Market experts believe the exaggerated rally was a direct result of constrained float and speculative trading. Veteran analyst Ambareesh Baliga noted, “The float was very low initially, which led to an artificial scarcity. As more shares enter circulation, prices are adjusting to realistic levels.”
Adding to the pressure, the upcoming lock-in expiry will release nearly 149 million shares (about 2% of total equity) into the market, potentially increasing supply and weighing on prices further.
Investor Sentiment and Technical Outlook
Investor sentiment has turned cautious. While long-term prospects for Groww remain promising given India’s digital investing boom, the current valuation is seen as stretched.
Technically, the stock had entered overbought territory, with RSI levels signaling a reversal. The correction has now brought indicators closer to neutral, but analysts warn that volatility may persist until earnings clarity emerges.
What’s Next for Groww?
The company’s first quarterly results post-listing, scheduled for November 21, will be a crucial trigger. Investors will closely watch updates on its Margin Trading Facility (MTF) expansion and monetization strategies.
If earnings meet expectations, the correction could stabilize. However, if results disappoint, further downside cannot be ruled out.
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Conclusion: Groww’s rally and subsequent short delivery crisis serve as a reminder of the risks inherent in low free float IPOs. While the company’s growth story remains intact, investors must balance enthusiasm with caution, focusing on fundamentals and disciplined strategies to weather the volatility.
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