Why ULIP mis-selling has become rampant ?

After a little lull in the first half of August, secondary markets have got their mojo back. In the previous month, Nifty 50 skyrocketed 1,337 points or 8.4% to an all-time high of 17,222. Likewise, the BSE Sensex zoomed 9.35% or 4,968.11 to record peaks of 57,913.46 that it hit on September 01. This trend is visible in both primary and secondary markets.

After a lacklustre performance in the month of August, activity in the primary markets is slowly picking up. On September 1, Vijaya Diagnostic Centre and Ami Organics hit the street with their IPOs (initial public offerings) to cumulatively raise Rs 2,464.68 crore. But this is just the beginning as market experts are of the opinion that as many as 9 companies could raise around Rs 12,500 crore, compared to Rs 18,200 crore raised in August.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the performance of the IPO market usually has a strong correlation to the performance of the secondary market.

“If the stock market is bullish, it attracts a large number of investors into IPOs. Particularly, new investors lured by high potential profits, get attracted to new offers and the IPO market has always done well during market booms,” added Vijayakumar.

Besides Vijaya Diagnostic Centre and Ami Organics, Aditya Birla Sunlife AMC, Utkarsh Small Finance Bank, Arohan Financial, Penna Cement, Shree Bajrang Power & Ispat, Paras Defense, Fincare Small Finance Bank, Bajaj Energy, GoFirst (erstwhile GoAir), Studds Accessories, Supriya Lifescience, Seven Islands Shipping and Shriram Properties are some of the companies that could launch their IPOs in September as they have already received a go-ahead from the capital market regulator Sebi.

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In the recent past few IPOs saw subdued retail participation due to aggressive pricing by the issuer. “There is a typical cycle which is witnessed in primary markets. Whenever the primary market is in over-optimism, a large number of companies rush to tap the markets at expensive valuations. No sooner do some companies get hammered, we again witness sanity prevailing in market. This has been observed earlier this year in March and again in August,” said Abhay Doshi founder of Unlisted Arena.

Currently, only 2 companies are coming up with an IPO of which one looks priced on the higher side and the other is moderately priced. But expectations are there that further issues will come up with reasonable valuations - only then we will witness good participation from investors as the IPO pipeline is still quite bulky and a lot of companies are looking to debut on bourses, Doshi added.