Ashwini Agarwal: Weak FII flows, expensive IPOs keeping market nervous

Ashwini Agarwal, Founder and Partner at Demeter Advisors, said investors appear nervous this results season, with even in-line earnings triggering sell-offs. CIting Bajaj Finance’s recent decline, he pointed to a broader trend of market anxiety.“There have been several stocks where earnings have either narrowly missed estimates or have been in line with estimates, and the stocks have been sold off,” Agarwal said. He added that this reaction is more visible in the mid- and small-cap space, where some stocks have fallen 15–20% despite reasonable results.

Explaining the reasons, Agarwal said, “We are not seeing any significant support from foreign investors. The amount of paper flow continues to be very high. New listings are not providing the kind of leg-up that investors are hoping for.” He noted that this has led investors to focus more on taking profits, asking themselves, “Where can I take money off the table?”

Also Read | Devina Mehra cautions retail investors against IPO hype, says valuations often unrealisticHe also highlighted uncertainty around the next six months of demand, especially after the festive season. “There are some question marks around rural demand recovery with extended rains having hurt crops,” he said. “People are worried that post the festival rush, demand may slow down again.”

On the non-banking financial companies (NBFCs) front, Agarwal said credit cost guidance remains positive, but the second quarter showed some stress in the MSME segment. He believes this stress is limited and that the sharp sell-off in lending stocks is more about weak demand sentiment than balance sheet issues.Turning to the initial public offering (IPO) market, Agarwal said many of the new issues look overpriced. “I find a lot of the new IPOs quite expensive. They don’t leave a lot of upside on the table,” he said.

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Comparing the current phase to 2021’s IPO rush, he added, “These IPOs are being priced to perfection. When investors don’t make money in IPOs, it slowly sours the mood.” He noted that a slowdown in IPO flows could be positive for secondary markets.

For the full interview, watch the accompanying video

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