Markets have a mind of their own there is no doubt. After RBI announced a rate cut of 25 basis points on expected lines and with a 5-1 verdict, markets began to correct. The correction lasted a mere couple of days and by weekend on Friday they were back to their winning ways scoring gains all over again. The markets are richly valued no doubt but the excess liquidity ensures that at every correction there are enough buyers.
The IPO from Cochin Shipyard had huge success and received subscription which is very noteworthy. This time of fund mobilisation has happened only after Coal India which was an issue over ten times in size of Cochin Shipyard. While Coal India was to raise Rs 15,500 crs, Cochin Shipyard was for a mere Rs 1,468 crs. The total amount raised was a staggering Rs 1.11 lac crs. The issue saw the QIB portion subscribed 63.52 times, HNI portion subscribed 288.87 times and Retail portion subscribed 8.51 times. The company received a total of 20.75 lac applications which is a new record bettering the previous one also from a PSU company, HUDCO which received 20.13 lakh applications.
Seeing the kind of subscriptions from the retail which is really taking to the markets through primary issues and also mutual funds, it’s time to revisit the various buckets that the IPO has been divided into.
It is now an open secret which even the chaiwala on Dalal Street knows that the HNI applies only through borrowed money. Why should he be allowed to bid for one time the whole issue when oversubscription in his category is not allowed to be shifted to the QIB category? He is only interested in doing this large an application so that unless the issue is subscribed in the HNI category by over 100 times the margin at which money is lent does not reduce. Without that comfort he is not interested in the issue. When one sees the total subscription by HNI’s and the number of people who have applied it invariably is less than the number of times that the issue is subscribed.
Further it is this category of people who play the grey or premium market and are not conducive for a healthy state in the primary market. With the regulator cracking down on the contentious P-Note market, why action is not taken here beats me. By not allowing the HNI to bid for more than the bucket size almost all problems would be solved. The regulator must attempt giving this a try and solve the problems of this hyped demand and rampant price rigging in the primary market which is not justifiable and sustainable.
Markets are looking tired but refuse to correct or consolidate. Who blinks first the markets or the investor only time will tell.
