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IPOs dry up as volatility continues in equity market

Last Updated 16 September 2019, 01:37 IST

Initial public offerings (IPOs) have completely dried up in the Indian stock markets over the past three months as the markets are hit by the continuing volatility on account of domestic and global factors.

The IPOs in the Indian equity markets stand at a mere 30 for the current financial year, down from 61 listings that markets witnessed till the month of August last year.

The data available with the Bombay Stock Exchange (BSE) further reveals that the markets haven’t seen any new listing since the end of May .

A similar situation was witnessed in the Indian markets after the mega-default by the shadow banking behemoth IL&FS in September 2018. However, the markets had bounced back in December with 18 new listings.

The current situation, according to the market insiders, is akin to the 2009 phase, when FIIs were withdrawing their monies across the globe as the US economy saw its worst recession since 1929.

This time around, there is no hope of revival of IPOs anytime soon — markets continue to be volatile amid the slowdown in the economy, which economists and experts have referred to as ‘quasi-recession’.

The market watchers blame the current market condition for the lower number of new public offerings. “The market conditions aren’t conducive for IPOs as there is very low-risk appetite,” said Anubhav Shrivastava, Partner, Infinity Alternatives.

The markets have witnessed a weak sentiment since the end of May when the then government’s official data suggested a sharp dip in the growth numbers, clubbed with unemployment sky-rocketing to a 45-year high. This turned the foreign investors, who control over 30% of India’s equity capital market, negative on the country.

But the actual bloodbath was triggered after the Finance Minister Nirmala Sitharaman, in her Budget speech on July 5, announced the government’s plan to tax the ‘super-rich’ with a far higher surcharge. This included many foreign institutional investors and foreign portfolio investors, who used to invest in Indian markets as individuals or association of persons.

Since the budget day, the FIIs have withdrawn close to Rs 35,000 crore from the Indian markets on a net basis, in what many market watchers refer to as ‘flight to safety’. “The earnings are not growing and in between all that government decided to increase their tax liability. That is when they actually started dumping Indian shares,” a CEO of a domestic mutual fund said.

Since July 5, the BSE AllCaps has dipped by 8.1%. BSE AllCap index is a broad index covering more than 95% of the total market capitalisation and comprises more than 700 stocks that are listed on the BSE.

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(Published 16 September 2019, 01:27 IST)

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