IPOs losing their sheen?

A few months ago, any investor worth his name would jump at the mention of an IPO, in order to pocket, if nothing else, the listing gains. Even non sophisticated investors, sans any working knowledge of the capital markets, knew that IPOs guaranteed gains, even though they did not assure allotment.

This was the scene at the time of high demand and low supply of shares. IPOs have always been over hyped for their listing gains, even though not for investment. It allowed companies to conveniently price their issues high, making good money in the market. And everybody was happy.

But the party did not last long. With the exodus of FIIs it appears that capital markets are not that interesting any more. Caution is the name of the game. Everyone is trying to sell or is stuck because they had bought at higher levels.

Who would believe that an infra IPO could not get fully subscribed? But it has happened to Emaar MGF, they have resorted to private placement for funding. At least this capital budgeting technique does not work on volatile sentiments, but on fundamentals.

http://economictimes.indiatimes.com/Emaar_MGF_withdraws_IPO/articleshow/2767016.cms

The biggest IPO (already devoted two articles in my blog) does not seem to find many takers. Banks are already bombed with stop payment orders. The IPOs suddenly appear overpriced.

How to expect next? The IPOs listed in this bear market will surely have a hard time. And listing gains may be a thing of the past.

I am not technical analyst, but I believe in the India story. Over the long term, the fundamentals look intact. Hence I will take every opportunity to buy…the FIIs wont knock before joining the party!!!