Markets were under pressure and continued to correct through the first four days of the week. Friday however saw them trying to reverse the trend, however they surrendered almost all the gains in the last hour and closed virtually flat. BSESENSEX lost 638.72 points or 2.04% to close at 31,283.72 points. NIFTY lost 175.80 points or 1.80% to close at 9,788.60 points. September series futures expired with losses of 148.95 points or 1.52% to close at 9,768.95 points.
The primary market is on full throttle and we seem to have back to back issues one after the other. Last week was no exception and this week would be an example of yet another. The week begins with the anchor book of Godrej Agrovet and the listing of SBI Life Insurance on Tuesday. This would be followed by the listing of Prataap Snacks on Thursday. The issue of MAS Financial Services Limited would see its anchor allocation happening on the same day itself.
One wonders whether IPO valuation is reasonable or expensive? No one really cares if the issue gets subscribed. The added comfort to the merchant bankers is the hype that is created in the HNI segment and the funding that they enjoy. It is this group of less than 500 individuals who are responsible directly or indirectly for creating the grey market and providing it patronage. The wrong policy of the regulator in allowing HNI’s to bid for the QIB category and distort demand is shocking. One wonders when the QIB portion is not fungible where shortage in demand from QIB’s can spill over to HNI and retail, why allow HNI to bid for that? If this small and simple action is taken the ridiculous demand that is being seen for issues where over Rs 50,000 crs are raised for an IPO offering of a mere Rs 400 crs would stop. The only beneficiary in this entire game are the NBFC’s who fund this requirement.
The regulator would achieve three major things. Firstly a highly objectionable grey market would be made redundant. Secondly distortion of demand would stop where a mere 250-300 individuals are literally creating a complete false sense of demand. Thirdly price discovery and sustainability of the new issues would increase significantly as ipo pricing would be far more sensible and logical.
One hopes and prays that the new regulator looks into this key issue of allocation in IPO’s.
Keep your eyes on the market quarterly results and feet on the ground as we are not yet out of the woods.
