The Indian primary market has bucked a two-decade trend of coming to a virtual standstill before a general election with record fundraising as investors and companies are more certain about the outcome of the polls this year.
In the period from October to February, 39 companies sold Rs 33,253.07 crore of shares, data from primary market tracker Prime Database shows.
Comparatively, in the six-month period (October to March) before the previous four elections in 2004, 2009, 2014 and 2019, only 20 companies came out with IPOS for Rs 4,308 crore across these four periods, according to the data.
The amount raised in IPOs in the six months prior to this election cycle is more than seven times the amount raised in the previous four election cycles put together.
"And more issues are likely to be launched even in April and May,” said Pranav Haldea, managing director of Prime Database Group.
Experts said investors and companies are less uncertain about the outcome of the elections this year, leading to a strong positive sentiment in both the primary and secondary markets.
The momentum in the IPO market seems to be unrelenting, with four new issues for Rs 1,548.75 crore launched so far in March. Popular Vehicles and Services and Krystal Integrated Services are currently selling shares for Rs 601.5 crore and Rs 300 crore, respectively.
With a robust pipeline of deals, primary market activity is expected to continue well into the voting period in the coming months even amid concerns of froth building up in the midcap and small-cap segments.
Also read: Pockets of irrational exuberance in small and midcaps, says SEBI chief Madhabi Puri Buch
General elections are typically held between April and May in India. The dates for this year’s general elections are yet to be announced.
According to Haldea, there were some uncertainties over the outcome of previous elections and the primary markets are averse to uncertainty and volatility due to election results, geopolitics, or inflation.
“Primary markets tend to shut down in periods of volatility,” he said.
Haldea added that this time around, there seems to be a wide consensus on the election results and political stability is boosting market sentiment.
Experts added that while confidence around the re-election of the BJP government led by Prime Minister Narendra Modi and the resultant continuity of economic policies and infrastructure projects are boosting market sentiment, other factors too are adding to the primary market tailwinds.
“Other important factors include India’s sustained high GDP growth as compared to most global economies, a structural shift in manufacturing dependence on China to India, and robust mobilisation of domestic funds leading to decreased dependence on FII inflows,” said Samir Bahl, CEO of Anand Rathi Advisors. “Unlike in the past, IPOs have continued to witness traction through the holidays and in an election year.”
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