Are IPOs sure shot way of making money in India?
With the advent of yet another awaited IPO of IRFC, it begs the question whether the interest towards it is based on fundamentals or people looking to get their hands on listing gains & early entry into the stock. The rollercoaster ride that Burger King India experienced suggests a lack of focus on fundamentals and more towards short term money making.
Let’s take a look at all the IPOs that happened last year and their respective gains as of 17 Jan 2021.
Apart from Angel Broking, UTI AMC & Antony Waste, each of the stock have given a return of more than 20% and if you average out the return of all the IPOs considering you have invested equal amount in each of them, it would be close to 61.63%
Not all the mentioned stocks had listing gains. Stocks like SBI Cards & Rossari took months to recover from initial dip and UTIAMC went higher than its IPO price only on 15 Jan when news came of it being one of top pick for Mutual funds. Also, many stocks like Equitas Bank are riding the bull run and might crash if a market correction happens.
The same bull run can be attributed for high returns of major stocks but that does not take away companies that are fundamentally strong with good moat and financials to back them up.
So, all in all, I just wanted to highlight and question this attractiveness toward IPOs that is going on at the moment in India but is it because of good entry point for investors or credit goes to bull run ? Well, no one knows for sure but based on data presented they do seem like a promising opportunity to make good money.
- Included all the stocks that had an IPO between Jan 2020 to Dec 2020 based on this list
- The prices are calculated on 17 Jan, 2021 based on NSE.
