Will the FPO fund infusion solve Vodafone Idea’s problems?

In the last 7 months, we have seen about 28 companies completing their IPO and raising about Rs 42,000 crores; with 70 more IPO’s in pipeline, this year might have highest number of IPO’s till date over the last 15 years as per data given below. This includes brands like Zomato, Tattva Chintan Pharma, Glenmark Life science, etc.

IPOs are witnessing huge demand with impressive listing gains. A large number of investors have been opening Demat accounts recently, for investing in secondary markets, and filing applications for IPO, data from the Securities and Exchange Board of India (SEBI)suggests. The number of new Demat accounts opened between April 2020 and January 2021 was around 10.7 million.

IPO Boom

Equity gains over the last year outperforming key benchmarks has created equity rush. IPOs like Tattva Chintan Pharma, GR Infra, Chemcon Specialty Chemicals, Happiest Minds

Technologies, Route Mobile, GR Infraprojects – and Clean Science &Technology that almost hit a 100 per cent gain, they didn’t stop there but still impressed investors by giving 2x,3x returns on investment

Here is a look at top 5 listings and their returns till current date:

New Age Companies

When we look at any new-age companies like Zomato which made an impressive listing on Indian bourse on July 23 with nearly 53 per cent gains, MTAR technology gaining 85% from the issue price of Rs 575,Burger King with a massive 130.7% gain from issue price of Rs 138.4 etc based on modern business fundamentals, investors have made bets on their future growth and profitability even though peer comparison is not possible, which is evident from their listing gains.

FII Flocking to INDIA

Inflows of foreign direct investment (FDI) into India are shown in the chart below.

The amount of money that FDI and FII put into the markets indicates that this factor is pushing up the number of retail investors into equity. This is significant as FDI equity inflow grew by 19% in the F.Y. 2020-21 ($ 59.64 billion) compared to the previous year F.Y. 2019-20 (US$ 49.98 billion).

Behavioral factor

Changing investment behavior drives the main market. The low interest rates provided by fixed income assets encouraged to move towards stocks from debt. This is mostly due to young retail investors who desire to participate in the rapid growth of businesses while also earning a fast return.

Increase in per capita Income

Over the recent years there is an increase per capita income which has led to more disposable income at hand. This has created a shift in mindset of people causing them to park the excess funds in market which has indirectly led to such impulsive moves in the market.

Conclusion

With the economy bouncing back and covid fears receding close to Rs 75,000 cr IPO are still in pipeline in 2021-22. Paytm , MobiKwik and several others firms are still in various stages of IPO.

Therefore, it can be said both the private and retail investors are making hay while the sun shines. For now we do know that it’s a trendy time for both markets and investors.

(The author is Founder & Director, Proficient Equities Private Limited; views expressed are personal)