Retail investors turn Street-smart, skip IPOs

MUMBAI: After cold shouldering some of the recent initial public offerings (IPOs), retail investors seem to have changed their minds on some of those companies post-listing, particularly the small and medium-sized ones. The stocks have attracted good interest from retail investors in the secondary market, which is also reflected in a rise in their holding in the past quarter.

According to brokers, retail participants would have adopted a wait-n-watch approach during the subscription period and subsequently entered the secondary market to take advantage of the sluggish movement in the shares, post-listing. Some, however, suspect operators could have played a role in pulling retail crowd to the stocks, particularly in cases where fundamentals are not so sound.



“Some retail investors could have sensed good investment opportunities in the companies after a sharp fall in the share prices,” said Ambareesh Baliga, vice-president of leading retail broking house Karvy Stock Broking. He, however, does not rule out the possibility of operators turning active in the counters and generating a lot of speculative movement with an intention to attract small investors.

Angel Broking CMD Dinesh Thakkar feels the retail buying in select companies could have been driven by sentiment. Another possibility is that some IPOs may not have evoked good retail response due to unfavourable market conditions. But, the investors could have taken a positive view on it with the improvement in sentiment after listing.

Globus Spirits is one such example where the retail portion of the issue was subscribed 0.96 times even though the IPO received the overall subscription of 1.1 times the issue size. However, post-listing, retail holding, has improved substantially from 12.9% as on September 30, 2009 to 16% as on December 31, 2009.

After debuting at Rs 91 against the offer price of Rs 100, on September 29, the stock declined sharply to a low of Rs 74 on October 17, 2009. Since then it has been languishing below Rs 100 and closed 2.3% down at Rs 96.5 on Tuesday.

The Globus Spirits counter has currently been attracting decent delivery-based volumes between 30% and 50% of the total traded quantity, reflecting a fair amount of genuine interest in the counter.

Some brokers feel there has not been any significant change in retail perception towards the market. “A general sense of disinterest still prevails among retail investors towards both primary and secondary markets” said Kotak Securities executive director D Kannan.

Apart from Globus Spirits, Raj Oil Mills and Edserv Softsystems are two other examples of low retail subscription at 65% and 98% respectively. Retail holding in the two companies, however, increased by 1.3 and 2.7 percentage points in the October-December 2009 quarter.

The two stocks are currently quoting at Rs 63 and Rs 259 respectively against their IPO prices of Rs 120 and Rs 60. They attracted healthy delivery-based volumes of 32% to 68% and 26% to 40% respectively in the past few days.