Given the economic uncertainty, the recovery of the primary market depends on the sustainability of the uptrend

Investors are getting cautious after getting their fingers burned in recent high-profile IPOs

Despite the strong rally in major benchmarks over the past two months, the primary market is still waiting for clear signals on the sustainability of the current uptrend, given the economic uncertainty.

Despite renewed market sentiments, Inox Green Energy Services, Uma Converter, Radhe Developers and Nandan Terry Towels withdrew initial public offering plans in the first quarter of this fiscal year, while three bids were returned to lead managers. for an update on company information.

About 63 companies have filed draft documents with SEBI this year, and another 71 companies that have received approval from the market regulator are waiting for the opportune time to tap the market. A total of 17 companies including LIC raised around ₹41,140 crore through IPOs this year.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said most IPOs issued at sophisticated valuations are listed below their issue prices and the current market rally, led by stocks with good earnings visibility, is not enough for reviving the IPO market.

After suffering huge losses in the four recent major IPOs, investors have become cautious and unwilling to bet on listing gains. LIC and Paytm’s IPOs, which were priced at ₹949 and ₹2,150 apiece at the IPO, traded at ₹686 and ₹772 on Friday, while those of Zomato and Policybazzar closed at ₹61 and ₹554 per share compared to their IPO price. from ₹76 and ₹980.

Last year, 63 companies raised a record amount of ₹1,18,723 crore, while in 2020, only 15 companies raised ₹26,613 crore.

Hopes Galore

Nevertheless, three companies – Prem Watsa-backed Go Digit General Insurance, Rakesh Jhunjunwala-backed Concord Biotech and Balaji Solutions – filed documents with SEBI this month to raise cumulatively ₹7,500 crore through initial public offerings.

While Go Digit General Insurance and Concord Biotech are looking to raise ₹5,000 crore and ₹2,000 crore, respectively, Balaji Solutions will mop up ₹400 crore from the capital market.

Rajnath Yadav, Research Analyst, Choice Broking, said the secondary market has been buoyant with inflation falling and REIT inflows picking up.

“While this has raised hopes of a resumption of primary market activity, we remain cautiously optimistic about future equity market momentum given the uncertainty surrounding geopolitical events and the sustained rise in equity levels. inflation in major European markets,” he added.

After withdrawing ₹2.17 lakh crore in the first six months of this year, REITs have reinvested ₹49,470 crore since July. Data on NSDL showed that REITs bought shares worth ₹44,481 crore till August 19 and ₹4,989 crore in July.

The main trigger for India’s sustained REIT buying has been the steady decline in the dollar index, which fell from over 109 at the end of July to around 105 recently. But on Friday, the dollar index rose again and crossed 107. If this trend continues, capital inflows could be affected, Vijayakumar said.

Published on

August 20, 2022

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