Equitymaster.com : Are you investing in IPOs?: "Are you investing in IPOs?
The Indian stock markets continue to make newer highs on the back of strong FII inflows, which is a factor of the seemingly strong economic prospects in sight for the country. Stock prices continue to soar and are making new 52-week highs consistently. There is everything positive at the current juncture for Indian equities and this has been attracting investors to equity markets.
Taking advantage of this gung-ho environment in the stock markets, many companies time their IPOs during such periods, as they are able to 'price' higher than they would have otherwise when the scenario is not favourable for equities. In this article, while we would refrain from commenting on whether one should invest in an IPO or not, we look at one important aspect of investing in an IPO and jot down a few points that investors need to remember.
As per reports, Indian markets are likely to see IPO offerings worth Rs 250 bn in 2005. Considering that approximately 25% of every issue is for retail investors, it implies that this category of investors would need more than Rs 60 bn to invest in the same. Further, considering that in bullish times, IPOs could get oversubscribed several times (including the retail portion). This, in turn, gives rise to larger amounts being invested"
