With bulls back on the Street, fund raising in the primary market has touched a record high in 2010. For the quarter ended March ?10, the primary market has seen issuances worth Rs 30,137 crore. This is more than what were witnessed during the same period of previous three fiscals. Last year, it dipped to a meager Rs 24 crore because of poor equity market conditions.
But not anymore. This year, as many as 20 companies tapped the capital market with initial public offerings (IPO) and follow-on public offerings (FPO). The value for the FPOs alone has been a whopping Rs 21,787 crore, mainly due to the mega issuances from public sector companies such as REC, NTPC and NMDC. Even QIP issuances, which stood at Rs 3,511 crore this year, have been the highest in the past four years.
And this is just the beginning. The year ahead is likely to see record public issuances ? with the government itself targeting Rs 40,000 crore from disinvestments in PSUs.
Experts attribute the buoyant sentiment in the markets to several factors. ?The capital market has sprung back into action, macro numbers are looking good and investor confidence is back,? says Jagannadham Thunuguntla, equity head, SMC Capitals.
According to Gopal Agrawal, CIO and head (equity), Mirae Asset Global Investments, the IPO pricing in general has been good. ?Whenever there is something left for the investors on the table, there has been a large appetite and good returns,? he says, while pointing out that IPOs attempting to raise lower amounts of money have done well. In contrast, some of the PSU issues, such as the recent follow on offer of NMDC, saw lesser participation ? with bulk subscription coming from state-owned enterprises like LIC and SBI.
Interestingly, FIIs have also contributed to the high inflows. Foreign institutional investors have invested Rs 5,314 crore in the primary market this year till March 10. They have been particularly bullish on the Indian markets since the Budget, with investments totalling Rs 2,109 crore.
However, market participants are not sure to what extent fund-raising in the primary market will affect liquidity in the secondary market. ?Liquidity in the secondary market will get affected to a sizeable extent since the market movement is sideways,? says Thunuguntla of SMC Capitals.
However, some experts feel the impact could be limited. ?If the right stocks are available at the right valuation, it will broadbase the market,? says Agrawal.