Retail investors in India are rushing to buy shares in initial public offerings (IPOs) this year. These new stocks have delivered impressive returns, far surpassing the broader market and international listings.
Record Gains
According to Bloomberg data, stocks that started trading in India this year have averaged a 57% gain since their debut. This is significantly higher compared to a 32% gain for Asia Pacific and more than double the global average.
Upcoming IPOs
At least 15 more companies are planning IPOs in the coming months, potentially raising a combined $11 billion. Retail investors have been crucial for these IPOs, making India one of the top spots globally for IPOs in 2024. High valuations and positive economic prospects are attracting issuers.
A Growing Trend
“It seems like a juggernaut that’s not going to stop anytime soon,” said Vineet Arora, who manages the Singapore-based NAV Capital Emerging Star Fund. “Younger generation investors are shifting from traditional assets like real estate to stock markets.”
Retail Investors’ Impact
Retail investors bid for about $10.6 billion worth of shares in 36 IPOs on Indian exchanges this year, according to Prime Database Group. This amount was more than 12 times higher than the shares available to them. Every new share sale had its retail quota fully filled.
Even after regulators increased surveillance following several IPO flops, retail interest hasn’t declined. Authorities aimed to reduce “malpractices” by limiting lending for share purchases, but this hasn’t deterred individual investors.
Quick Gains
Recent IPOs have seen tremendous demand. For instance, Exicom Tele-Systems, an electric vehicle charging firm, had retail investors bidding for 120 times more shares than available. The stock has since rallied almost 230% from its IPO price.
Short-Term Strategy
Despite the excitement, many retail investors plan to sell their shares quickly rather than hold them long-term. Pranav Haldea, managing director at Prime Database Group, noted, “Most retail investors come in to flip and are not studying the companies or sector and financials. With the kind of listing gains we are seeing now, if one gets an allotment, there is quick money to be made.”
Retail investors in India are capitalizing on the IPO boom, enjoying substantial gains and showing no signs of slowing down. As more companies prepare to go public, this trend is expected to continue, making the Indian IPO market one of the most lucrative in the world.
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