After Inflation Survival With Double-edged Sword Of Pre IPO Investing
The modern world has a very complex financial outlook due to the stock market's volatility. Stakeholders and potential investors can easily penetrate through the widely available information on the internet. The smooth access to required data allows investors to analyse every detail of listed and unlisted share prices while collecting the exact data they are further interested in.
In recent years inventors have understood professional analysis and data collection rather than emotionally investing in a company's share. Primarily people believed inflation is a result of an unhealthy economy and volatile market that could result in facing further monetary loss. However, with better information in everyone's hands, understanding the economy is not tricky anymore. Be it pre-IPO shares or the listed share market; investors learn about economic cycles to make a prudent decision at different stages of investment.
This year, the global stock market has experienced a significant downturn. Inflation has been rising simultaneously worldwide, reaching a 40-year high in the United States at 9.1% and 7.01% in India in June 2022. Furthermore, in the year 2022, The U.S. Federal Reserve raised interest rates by 225 bps (basis points). Moreover, higher borrowing costs, higher product prices (materials, labour), and lower standards of living are all generally viewed as negatives for equities, and higher inflation is no exception. Significantly the stock market lowers expectations for earnings growth, pushing stock prices lower.
However, the question is, does inflation affect unlisted share prices? The short answer would be, 'Yes,' pre-IPO stocks would feel a pinch of inflation. Whereas the impact could be regulated with proper research and analysis of the pre-IPO share market, which includes points like brand image, business model and long-term monetary benefits offered by the unlisted shares. Professional financial experts or unlisted shares brokers also play an impactful role in providing a trusted guide to new investors during times of inflation and ensuring the investment process goes hand-in-hand with the demand and supply of pre-IPO stock. Companies like Stockify provide early access to unlisted shares in India, where the companies can deliver multifold returns through their pre-IPO share price.
The consistent trend demonstrates that times of rising inflation are associated with comparatively poor pre-IPO stock market performance. At the same time, does this imply that growing inflation is detrimental to the economy? Actually, no. Ironically, the pattern shows that increasing inflation rates are typically associated with increasing Gross Domestic Product (GDP). Indeed, extremely low inflation rates can impede economic expansion, but investing in the right unlisted shares can always result in better returns. For example, unlisted shares like Elcid Investments Ltd, Tata Technologies Limited Unlisted Shares or HDFC Securities Limited Unlisted Shares are some prominent names that are not significantly affected by market inflation due to their financial status in the pre-IPO market.
Therefore, it is easy to conclude that rising inflation is necessary for economic development despite certain potential negative effects. Furthermore, investing with proper planning and guidance would not adversely affect the unlisted shares in India.