Indian IPO: A Goldmine Sans Index

Abstract

This article provides a detailed analysis of IPOs (initial public offerings) in the various sectors across the Indian primary market from the period January 2005 till March 31, 2007, during which 140 public issues were floated. Forty two issues were floated in 2005, 65 in 2006, and 33 in 2007 (till March 31,2007). It was observed that during this period, the IPOs gave a return of 33% on average after being listed on the Indian stock exchanges. Due to good returns, IPOs are increasingly becoming an attractive investment avenue for wealth creation. In such a scenario, it is important for the investor to know the sector-wise performance of IPOs, as investors would prefer to take informed decisions and plan their investments in different sectors according to the risk-return characteristics of various sectors. Moreover, in order to gauge the performance of the primary market, development of an IPO index in the Indian context is necessary. The present study throws light on the development of an IPO index and on structuring a model IPO index for the Indian primary market.

TOPICS: Security analysis and valuation, emerging, exchanges/markets/clearinghouses