Newly listed firms have mostly avoided this red zone despite the recent correction being more noticeable in some areas of the market where well-known brands found it difficult to maintain their position.
Almost two-thirds of the initial public offerings (IPOs) made in the past four months are still trading above their issue price. Conversely, one-third, or 33%, of the businesses fell below their IPO prices.
Due to global uncertainty and the departure of foreign institutional investors, the purchase has been especially harsh for firms not under the scope of the IPO.
According to the headlines, up to 45 of the 50 major firms in the Nifty index have produced negative returns since the September peak. According to an ET study, more than 400 of the 528 equities with a market valuation of at least $1 billion (Rs 8,700 crore) saw a 20% decline from their peak values.
Returning to the new firms on the D-Street, about eight of them have made at least 50% of the issue price. The top performer, KRN Heat Exchanger, which went public last October, had a return of more than 300%. In contrast, January newcomer Quadrant Future Tek finished far behind with a 96% return.
Outliers do exist, but not all of them were as successful. Several businesses found it challenging to sustain their IPO pace; 13 firms, including Carraro India, Godavari Biorefineries, Acme Solar Holdings, CapitalNumbers Infotech, and Suraksha Diagnostic, fell below its issue price.
Strong investor interest in the primary market sector is the reason for IPOs’ exceptional performance, especially during market downturns.
India’s initial public offering (IPO) sector has grown dramatically over the past few years, surpassing several developed markets in money raised. Just over 75 firms went public in FY25 alone, and almost 50 are already trading above their initial public offering (IPO) price.
These businesses are protected from broader market turbulence by operating in narrow areas with strong industry prospects. Analysts said that investors frequently see these businesses as long-term investments because of their capacity to grow and generate steady profits, even in times of market decline.
Additionally, there is a lot of opportunity for growth after listing, provided the IPOs are priced appropriately. Since investors are still optimistic about the future of these recently issued equities, this optimism will frequently serve as a buffer against more significant market drops.
These businesses also benefit from the lack of prior performance, which encourages investors to take chances and place bets on the company’s potential in the future rather than dwelling too much on the past, which doesn’t exist.
Blind investments can result in financial difficulties, even if initial public offerings (IPOs) have become increasingly popular in Indian markets. Additionally, it should be mentioned that these equities only make up a small portion of the market and that investors may become susceptible if they are overexposed to these businesses.
At a time when the majority of experts are promoting diversification and a predisposition towards blue chip companies, this is especially crucial.
According to experts, investors may use the present market downturn to move from mid-and small-cap stocks, which are already overpriced, to decently valued large-cap stocks.
