DSIJ.in JULY 10 - 23 , 2017 I DALAL STREET INVESTMENT JOURNAL (^49)
Vishal Purohit Co-Head- Equities, Prabhudas Lilladher
IPO markets are doing well in
- What would your advice
be for retail investors who are
aggressively looking at IPOs for
investments this year?
The best way to play IPO is to invest in
mid-cap funds and broad base the ride,
rather than individual bets which can
have limitations of liquidity,
oversubscription and, most importantly,
the quality of IPO one picks.IPO allotment in retail category
is done on pro-rata basis if IPO
is oversubscribed. How does a
retail investor improve chances
of getting higher number of
shares allocated?
The IPO process is standardised and
one may get a 'left out' feeling, especially
in oversubscribed issues, as finally the
ratio determines the final allotees. A
slight better chance one stands in largely
oversubscribed QIB/HNI categories is to
apply in all household names in retail
category to at least stand a better chance
from the ratio of oversubscription.Why are we seeing so many
IPOs hitting markets at this
time? Does this indicate market
top?
The IPOs are a function of strong
domestic and FII liquidity. In the last 18
months, the domestic flows across
mutual funds have been stronger as other
asset classes like gold, real estate,
commodities, debt markets, etc. all have
had some issue or other. The increased
transparency across economy is also
helping push investors towards equities.
The quality and vetting process and
increased regulatory radar has helped the
quality of companies coming out with
IPO. As long as the rest of the economy
has an increased level of uncertainty, IPO
markets will have a good appetite of
investment and I don’t think it is a signal
of market top.with geopolitical tensions in Middle East, concerns
over US trade policy changes and development in
the UK over Brexit are the key risks for the equity
markets in the second half of 2017.CONCLUSION
Investors can closely look at IPOs that have seen
good appetite from institutional investors. The
Indian macros along with global liquidity will
ensure plenty of opportunities knocking
investors door. The global equity outlook is
positive and supporting the positive momentum
in Indian equities. The performance of IPO
markets in 2017 so far has cheered investors in
India and the participation in IPO markets will
remain healthy.It is observed that the promoters of several
successful issue have left lot of value on the
table for investors, unlike in several of the
richly valued issues which were floated in the
year 2007. The rewards of identifying right IPO
to invest in are huge, as is seen in the
performance of S&P BSE IPO index.Investors may adopt a strategy of buy and
hold on quality fresh issues, instead of selling
the stocks on the day of listing, as it is seen
that quality issues which list with a premium
on issue price have a tendency to gain
further ground outperforming the broader
markets.
Source : EY DS