If you believe in blindly investing in primary market issues, here’s some data that may make you sit up and think. Nearly 50% of the new scrips, which got listed after the May meltdown, were trading below their issue price at the close of the year.
Here’s an even bigger shocker. If you have been investing in all the initial public offers (IPOs) and follow-on public offers (FPOs) for the last three months, four out of every five stocks that you now own were trading below their listing price on the last trading day of 2006.
According to an ET study, 48% (18 out of 37) scrips that entered the market between mid-May and December 31 are trading at a discount to their offer price, while the Sensex has shot up 50% during the same period after touching a low in early June. While the volatile market post-May meltdown was said to be the reason for the poor turnout of new issues, the performance of scrips which got listed between October and December was actually worse. Fifty two per cent of them are trading below their offer price. Barring one sharp correction, the market has not witnessed a rough ride.
The real picture emerges after a close scrutiny of the data. The opening day performance of the new scrips hasn’t been too bad. Infact, just about one in five IPOs and FPOs have opened lower than their issue price. However, here’s another half of the story. As much as 70% of the scrips are trading below their list price. What’s more, in the last quarter of 2006 the performance has only become worse with 78% of scrips trading in the negative zone compared to their list price.
The list of top five underperformers include Zenith Birla, Gangotri Textiles, Rathi Udyog, Richa Knits and JHS Svendgaard. But there are some stocks which have bucked the trend. Some outperformers include Allcargo Global, GMR Infrastructure, Tech Mahindra, Voltamp, Atlanta, Action Construction, DCB, Info Edge, Parsvnath, Sobha Developers and Nissan Copper. However some of these have listed recently and it’s still early days to gauge their performance.
