Krishna Karwa Moneycontrol Research
Indian equity markets witnessed an IPO boon in the past 15 months spanning key sectors such as banking & financial services, oil & gas, pharma/healthcare, retail, infrastructure, and technology. All of them generated immense interest from the investor community too, as evident from the oversubscription numbers. While some stocks rallied exceptionally, there were quite a few disappointments as well.
Our analysis of the listing price of stocks and their trading history reveals that even high profile IPOs were subject to price correction at some point of time on account of market volatility, thereby presenting a window of investment opportunity to existing and potential investors, as seen below:-
So for investors who may shy away from applying in an IPO for the fear of low allotment, the message is loud and clear: the secondary market will present an opportunity to buy the unallotted quantity, thereby driving the cost of ownership down.
The data also goes on to suggest that barring a few (Dilip Buildcon, Quick Heal, TeamLease Services), the stock price has seldom corrected below the issue price, as observed in the following table:-
The key takeaway from this analysis for the prospective investor is that if he has missed the IPO bus last year, it makes sense to ride it with good IPOs in FY18. In the event of lower-than-expected allotment, the investor should remain watchful of the post listing price changes and identify an apt avenue to invest in the secondary market, should the market uncertainty present an interesting entry opportunity.
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