Should You Redeem from PPFAS Flexi Cap Fund amid a continuous fall in Facebook Stock Price?

3 min read

On February 3rd, 2022, the stock of Facebook fell by around 26% and is continuously tumbling. What are the reasons behind the fall in the stock price of Facebook, how did it impact the Indian Stock Market, and should an investor withdraw from PPFAS Flexi Cap Fund, let’s discuss it in this article as we move ahead?

Reasons behind fall in Facebook Stock Price:

  • Facebook made its debut in NASDAQ in the year 2012 for $38 (~Rs. 2,850). Initially, the stock was highly criticized for its crazy valuations of $30 billion and therefore stock witnessed some downtrend. But post that downfall, the stock witnessed a significant journey and reached higher levels of around $384 (Rs. 28,800).
  • Facebook or Meta Platforms Incorporation generates the majority of its revenue from the Advertisement. But now the company is investing highly into future technologies like Metaverse, etc.
  • In the past, Facebook also did 2 major acquisitions of popular social media platforms Whatsapp and Instagram.
  • Now coming to the performance of the September-December 2021 quarter of the company. Here, the company’s topline performance was impacted due to a change in the privacy policy of Apple iOS which affected its Ad revenue segment.
  • Although these changes in Apple iOS have not affected greatly in December Quarter, the company has given a revenue forecast which is ~10% lower than the market expectations for the next quarter. And hence, if the top line of the company gets impacted it will surely affect the profitability of the company as well. Due to these reasons, the Facebook stock is primarily on a downward journey. Currently, it is trading at around $225 or Rs. 16,900.
  • In addition to the above reasons, the Institutional Investors and the Research Houses have also given Neutral Ratings which earlier stood at ‘Overweight’. Also, they have downgraded the stock price target.

Should You Withdraw from PPFAS Flexi Cap Fund?

  • In 2008, the upper limit for the Overseas Investment Limit or Foreign Stock Holdings was set at $7 billion (~Rs. 52,500 Cr.) by the Reserve Bank of India and Securities and Exchange Board of India (SEBI) for Asset Management Companies (AMCs). And now, these investments have almost reached such a level where it is breaching the limit set by regulatory bodies and hence AMCs are instructed to suspend any incremental investments in overseas funds or securities.
  • It is expected that this upper limit can be increased in the future period.
  • PPFAS Flexi Cap Fund is one such mutual fund scheme from Parag Parikh Mutual Fund House that invests in foreign stocks. This fund has an allocation of around 6% towards this stock. Due to the recent regulation from a regulatory body, it has suspended incremental investments in this fund.
  • From an investment viewpoint, there is nothing to worry about for investors. Here is a very short period, the limit of $7 billion (~Rs. 52,500 Cr.) in the Overseas market can be increased and this suspension is temporary and it will be lifted soon as things get right.

What Should Investors Do?

  • Technology Stocks have witnessed a phenomenal rally in the US and these kinds of corrections are normal. From a business viewpoint, companies like Alphabet, Facebook, etc. are global Multi-National Companies (MNCs) are well strong established companies and have a global presence. This fall in the stock price of Facebook (also known as Meta Platforms Incorporation) can be a good opportunity for retail investors in India. Generally, the best way for retail investors to invest in Facebook stock is through mutual funds.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent are commendation to buy or sell stocks or MF.

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