Market Turmoil:
On Friday, February 2, Paytm shares faced another hit, hitting the lower circuit at the Bombay Stock Exchange (BS) with a 20% drop on the National Stock Exchange, reaching the limit of 487 Ruppee 20 paise. This marks a significant 40% decline in the company's shares over the past two days.
Understanding Lower Circuit:
In stock market terms, the lower circuit signifies a situation where a stock experiences a sharp decline, triggering a temporary halt in trading to prevent panic selling. This has been the case for Paytm.
Demonetization Impact and Paytm's Rise:
In 2016, Prime Minister Narendra Modi's demonetization move created opportunities for fintech companies, including Paytm-in. The company's bold advertising campaign, featuring PM Modi, encouraged the shift to digital payments. Vijay Shekhar Sharma, the founder, and CEO of Paytm, predicted that demonetization would accelerate digital payments, a prophecy that proved true with a significant surge in users and transactions.
Expanding Services and Paytm's Banking Challenges:
Paytm expanded its services across various sectors, including commerce, insurance, stock broking, and payment banking. However, after the Reserve Bank of India's decision, Paytm's payments bank faced restrictions on credit transactions and deposits from February 29. Paytmbank. announced an audit by an IT team, and until completion, services will be limited to existing customers.
Stock Market Impact:
Post the regulatory actions, Paytm shares have consistently declined. On January 31, the shares closed at ₹1.20 paise, dropping to ₹609 on February 1, marking a significant fall of 155 Ruppe 22 paise. On February 2, a 20% lower circuit was triggered, and the shares fell to ₹487Rupee 20 paise, resulting in a loss of Rs. 10,000 crores.
Brokerage Ratings and SEBI's Intervention:
Brokerage firms like JP Morgan and J Freeze revised their target prices for Paytm. SEBI's implementation of circuit breakers aims to prevent panic selling by triggering temporary halts at different percentage levels during market declines.
Conclusion:
The recent market fluctuations, especially in Paytm shares, highlight the challenges faced by fintech companies. SEBI's circuit breakers aim to instill stability during market turbulence. As we await further developments, stay tuned for our future updates.
