Big bubble in unlisted space? Big Bull, Ashish Chugh sound the alarm bells

The Big Bull sees a big bubble in the unofficial market for unlisted shares.

New Delhi: Ace investor Rakesh Jhunjhunwala recently advised investors to keep off the unlisted space. The Big Bull sees a big bubble in the unofficial market for unlisted shares, which he said may burst in the near term.

“I think there is a big bubble in all these unicorns, and this is going to burst in next 12 months. It is already bursting, and it will burst in the next 12 months,” Jhunjhunwala told ET Now in an interview earlier this week.

However, dealers of unlisted shares only partially concur with the view. They argue that while there are some unicorn stocks, which are unreasonably overvalued, not all unlisted shares trade at premium valuations.

Analysts from the unlisted space say Jhunjhunwala might be pointing towards stocks like Reliance Retail, which was hugely overvalued. After Reliance Industries mandated a share swap in the 4:1 ratio, the stock halved its value from the peak of Rs 900-950.

“His words are partially true. There are some stocks that trade at very high valuations. Investors overvalue these stocks and pour ample wealth in them. Reliance Retail is one of them,” said Sagar Shah of Ascent Wealth Advisors, a broker who deals in unlisted shares.

“If something is trading at a valuation above its earnings, there are high chances of the bubble getting burst. But undervalued stocks tend to perform better, particularly near the IPO launch,”
said he.