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Stock's Wild Ride: Free Float Fuels Short Squeeze
20 Nov
Summary
- Low free float created a technical trap for short-sellers.
- Massive demand combined with tight supply caused extreme volatility.
- Stock's market capitalization crossed ₹1 lakh crore rapidly.
A significant stock rally was largely driven by a low free float, creating a technical trap for short-sellers. Limited shares available for public trading, coupled with substantial demand, resulted in extreme volatility and a sharp increase in the stock price. This phenomenon propelled the company's market capitalization to cross the ₹1 lakh crore mark in a remarkably short period.
Analysts noted that the stock's valuation, even before its IPO, appeared high. The post-listing surge further inflated its multiples, largely attributed to the promise of digital scale and future product expansion. This rapid ascent and subsequent price correction, triggered by selling pressure overwhelming buying demand, led to a circuit breaker.
While the company's long-term growth prospects remain attractive due to user acquisition and its position in India's financialization trend, the market is now recalibrating its short-term valuation premium. Experts suggest that current levels may warrant caution for value-oriented investors, indicating that a healthy correction was anticipated.
