Startups have become mainstream. The Street is no longer wary of businesses that are yet to show promise. So much so, that Zomato and Jio Financial Services have entered the benchmark indices.
Startups have become mainstream. The Street is no longer wary of businesses that are yet to show promise. So much so, that Zomato and Jio Financial Services have entered the benchmark indices.
As many investors embrace the 'promise' of digital and new-age businesses, a few experts are even backing the idea of a dedicated index for such businesses, like Nifty Bank and others.
The Nifty, especially, has indices like Nifty India Digital and Nifty India New Age Consumption. While they track a few digital businesses, they also include traditional companies, making them less startup-focused.
"With around 40 digital-first companies now listed, there can be a dedicated index that accurately represents India's thriving startup ecosystem, offering investors targeted exposure to high-growth tech enterprises," says Gaurav Garg, research analyst at Lemonn Markets Desk.
Swiggy, Ola Electric, Ixigo, MobiKwik, GoDigit Insurance and more made their market debut in 2024, enthusing more such companies to go the public route. Added to that, a few listed startups like Zomato, Delhivery recently have demonstrated their ability to pivot to profits. Moreover, Info Edge, and IndiaMart, too, recovered from their volatile-earnings to evolve into value creators.
"India's public markets now have a healthy pool of new-age businesses, whether it's fintech, EV players or tech-first component makers. A dedicated index would not only bring structure but also make this space more accessible to everyday investors," says Chintan Haria, principal - investment strategy at ICICI Prudential AMC.
Indices, too, move with the times and see regular upgrades and changes over time. If such an index is formed, it will also bring a new set of investors for the listed startups. It can drive up valuations and trading volumes as exchange traded funds and more can participate in the sector.
"It boosts liquidity, attracting institutional investors and improving price discovery. Just as IT giants like Infosys and TCS were added when tech surged, digital businesses will naturally find their place in major indices as they mature and shape the economy," adds Garg.
The retail investors, too, can get easy access to high-growth digital businesses of an index, and invest into the 'theme' instead of analysing individual stocks.
New-Age Index May Take Time
However, not all experts support the idea of a dedicated index for startups or digital businesses. An index needs to have critical mass to ensure liquidity, diversification as well as meaningful representation. While a sector has a large number of companies, some accounting to 100s, indices represent the largesse by choosing a few. As of now, while startup listings are going up, their number is too less to pick and choose for an index.
"While these firms (digital-first, tech disruptors etc) capture investor imagination and reflect India's evolving economy, their numbers are still too sparse to form the foundation of a dedicated index. An effective index requires scale, stability and sectoral weightage — attributes that new-age businesses are still accumulating," opines Tarun Singh, founder and managing director of Highbrow Securities.
Singh believes that for now, they are better analysed as a thematic cluster rather than a formalised segment. "However, as more such companies list and mature, we may soon see the emergence of a 'New India' index — one that mirrors the country's digital transformation. Until then, patience and selective investing remain key," he adds.
Rising Risk Appetite Of The Young
The world is moving towards digitisation and the faith in disruptive businesses is rising. Mostly young investors are keen on investing for the future, with emerging economy themes gaining ground.
"India's young investors are not just participants — they're reshaping the market's DNA. Their appetite for innovation, comfort with technology, and willingness to back emerging themes like EVs, fintech, and SaaS are injecting fresh energy into the capital markets," says Singh.
India's GenZs or millennial investors are witnessing the tide turning and a few of them being digital natives want to invest in "business of their time". Loss-making businesses or those companies or platforms. which are heavily investing into newer business ideas, might seem risky to traditional investors. But a rising class of investors are willing to bet on them.
"Young investors are naturally drawn to sectors that look like the future — EVs, green tech, next-gen mobility. Investors are hungry for exposure to themes that reflect where the world is headed: cleaner transport, digital transformation and sustainability,” says Haria. ICICI Prudential has recently launched an exchange traded fund called ICICI Prudential Nifty EV & New Age Automotive ETF.
The Indian young investors are unique — they want to be a part of long-term structural stories, but they are also risk-aware. While startups are growing fast, they are also evolving. Even as few question the digitisation theme, many are of the opinion that some startups might fail but the rest might offer a great upside in the years to come.
"Nobody wants to put all their chips on a single stock. In fast-changing sectors, having that kind of diversification is key. It's how you stay in the game while managing your downside," adds Haria.
Do's & Don'ts Of Startup Investing
Industry experts hail the excitement of the new, they also warn of the pitfalls. The fall of Byju’s and the closure of many of other startups as well as governance issues, and Paytm's regulatory troubles have brought some of such problems to the fore. The sky-high valuations that these companies enjoy are also questioned by many experts.
"While the idea of a digital-first index is exciting, it needs a carefully crafted strategy to balance high-growth potential with risk management. Many startups burn cash without profits, making valuations shaky. A downturn in the digital economy could drag down the entire index, and sharp price swings could rattle investor confidence. With most companies being relatively new, historical data is scarce, making it harder to predict long-term performance," says Garg.
Moreover, few mutual funds currently offer options to invest in an aggregated pool of the new-age economy theme. The tide is turning here too, experts say. The mutual fund market is dominated by sectoral or thematic funds. But asset management companies are gradually introducing 'new generation' funds targeting disruptive businesses.
"Regulatory frameworks and market maturity will dictate the pace, but asset managers recognise the demand for such products. It's only a matter of time before more tailored offerings emerge, giving investors a structured way to participate in India's innovation story. Until then, active stock selection or thematic ETFs may be the go-to options for those bullish on this space," adds Singh.
Katya Naidu is a senior business journalist who writes about equity markets, startups, energy, infrastructure, real estate and healthcare.
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