Are IPOs lousy investment options? Data suggests otherwise

There are numbers of strategies or ways, which investors are using to make investment in equity markets for the better returns on their investments. Some take investment call on fundamentals basis other make on technical and more.
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Jun 19, 2011, 01.33 PM | Source: Moneycontrol.com

Are IPOs lousy investment options? Data suggests otherwise

There are numbers of strategies or ways, which investors are using to make investment in equity markets for the better returns on their investments. Some take investment call on fundamentals basis other make on technical and more.

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Are IPOs lousy investment options? Data suggests otherwise

There are numbers of strategies or ways, which investors are using to make investment in equity markets for the better returns on their investments. Some take investment call on fundamentals basis other make on technical and more.

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Are IPOs lousy investment options? Data suggests otherwise
Legendary stock picker Peter Lynch once said, “Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”

But is investing in the stock market that easy? Well, it can be both. There are a number of routes to the path of investing, each having its own pros and cons. Some take investment calls on fundamental analysis while others rely on technical calculations.

One of the popular modes of investment among investors has been the IPO route. But does investing in IPOs really feasible? So far the year 2011 saw many IPOs making their debut on the bourses but with mixed response.

A quick check of the data shows that any investor, just sticking to IPOs for investment in 2011, would have made a return of a cool 20% (net), year-to-date (YTD).

YTD in 2011, 17 companies have approached the capital markets with their IPOs. If an investor had made investment of Rs 10,000 each in those IPOs, i.e. Rs 1,70,000, then the net return on this investment would be Rs 2,02,966 (appx gains over 19%).

In the same period, the Sensex has given negative return of 17%. (From January 01, 2011 to May 31, 2011)

Further analysis of the data reveals, out of 17 IPOs, till date 10 IPOs have given negative returns.

Fineotex Chem , C Mahendra Expo and Lovable Lingeri were best performer amongst the lot. They have gained 300%, 123% and 106 respectively from their issue price.

However, Acropetal Tech , Shilpi Cable and VMS Industries were the worst performers, falling 77%, 75% and 55% respectively from their issue price.

Equity

Issue Price

Current Price

%Gain /Loss

Ytd return (Rs)

Appx Shares#

VMS Industries

40

17.95

-55.13

250

4488

Aanjaneya Life

234

358.8

53.33

43

15333

Sanghvi Forging

85

61.45

-27.71

118

7229

Innoventive Ind

117

92

-21.37

85

7863

Future Ventures

10

9.19

-8.1

1000

9190

Paramount Print

35

24.35

-30.43

286

6957

Muthoot Finance

175

158.75

-9.29

57

9071

Shilpi Cable

69

16.95

-75.43

145

2457

PTC India Fin

28

17.4

-37.86

357

6214

Lovable Lingeri

205

423

106.34

49

20634

Fineotex Chem

70

279.7

299.57

143

39957

Sudar Garments

77

109.35

42.01

130

14201

Acropetal Tech

90

20.4

-77.33

111

2267

Omkar Special

98

58.5

-40.31

102

5969

Midvalley Enter

70

125.15

78.79

143

17879

C Mahendra Expo

110

245

122.73

91

22273

Shekhawati Poly

30

32.95

9.83

333

10983

  Total Return on investment of Rs 1,70,000  == >  2,02,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data shows, in the last five year, the Sensex gave its highest return at 76% in 2009. This was the year when IPOs were in short supply.

Year

No. of IPO

Sensex return

2007

98

47.15

2008

43

-52.48

2009

17

76.35

2010

65

17.43

2011

17

-17.38

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