Introduction
IPO (Initial Public Offering) euphoria in India refers to a period when there is significant excitement and enthusiasm, among investors and the general public, about investing in newly listed companies on the stock market. This
excitement typically occurs when a wave of companies, especially those from the emerging sectors or with promising business models, decide to go public and offer their shares to the public for the first time.
What is an IPO?
An IPO is an Initial Public Offering of shares by private corporations to public through new issuance of stock for the first time. The Indian IPO market has gained momentum in 2023 with stellar debuts on chart. As of 2023, 14 major IPOs
have already been listed on exchanges, out of which Utkarsh Small Finance Bank, a Rs 500 crore-IPO received an overwhelming response from the investors and has been the lead gainer with a surge of 106% since July 21, 2023, the day of
its listing.
Most of the issues have given double-digit returns. Other than Utkarsh, the other IPO’s that have managed to sway investors include SFB and Cyient DLM with 95% returns since listing. Idea Forge’s Rs 1,142 crore- IPO had a bumper debut
as the stock listed at 93.45% up over its IPO issue price of Rs 672. The biggest by value, however, was Mankind Pharma’s IPO having Rs 4,325 crore-issue which has rallied 61% since the day of the listing.
Contributing Factors for the Indian IPO Euphoria
- Bullish Stock Market: When the broader market is performing well, investors are more willing to take risks and invest in new companies. A strong and bullish stock market often sets the stage for IPO euphoria.
- FOMO (Fear of Missing Out): Investors are afraid of missing out on potential gains, leading to a rush to invest in newly listed companies. This fear can be fuelled by media coverage and hype surrounding IPOs.
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Positive Economic Indicators: A stable and growing economy with low-interest rates can create a conducive environment for IPOs. Investors feel more confident about the future prospects of companies in such economic conditions.
- New and Exciting Sectors: If companies from emerging sectors such as technology, e-commerce, renewable energy, or healthcare decide to go to public, it can generate significant interest and excitement among investors.
- Successful IPOs: When early IPOs in a particular period perform exceptionally well, it can create a domino effect, encouraging more companies to go public and investors to participate.
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Strong Economic Growth: India's robust economic growth over the years has led to increased investor confidence in the country's stock markets. A growing economy attracts both domestic and foreign investors looking for
investment opportunities.
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Start up Boom: India has experienced a start up boom, with many innovative companies emerging in various sectors such as technology, e-commerce, fintech, and healthcare. These start ups often seek IPOs to raise capital for expansion and growth.
- Regulatory Reforms: Regulatory changes and reforms by the Securities and Exchange Board of India (SEBI) have made it easier for companies to go public, which has led to a surge in IPO activity.
- Retail Investor Participation: The participation of retail investors, driven by easy access to online trading platforms and increased awareness of the stock market, has fuelled IPO demand.
- Strong Market Performance: Positive market sentiment, with rising stock indices and favourable economic conditions, can create an environment conducive to IPO euphoria.
- High Valuations: Some IPOs are priced at high valuations, which can attract investors hoping for quick gains.
- Media Hype: Extensive media coverage and hype around IPOs can also contribute to the excitement and frenzy among investors.
While IPO euphoria can create opportunities for investors to profit from the initial surge in stock prices, it also comes with risks. Not all IPOs perform well, and there can be market corrections or volatility after the initial
enthusiasm.The enthusiasm and hype around IPOs can sometimes lead to overvaluation, and not all newly listed companies may live up to their growth expectations.
Investors are, thus, advised to conduct thorough research, evaluate the fundamentals of the companies going public, and consider their own risk tolerance before participating in IPOs.
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Namrita Singh Ahluwalia
Assistant Professor
School of Business & Management
SIILAS Campus, JNU Jaipur