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The primary markets' long dry spell ends
Mon, 26 Nov Pre-Open

Equities have not been amongst the most favourite asset class for retail participants over the past few years. We say this because the share of retail investors in mutual funds has been on a steady decline mode. While the stagnant market movement may be a reason, alternate asset classes such as gold and real estate have also seen a lot of interest.

However, ever since the announcements of the various reforms have been made, interest levels - especially from the non-retail participants' side - have increased. This is on the back of the broader outlook of equities improving as some much needed reforms, such as the diesel price hike, were announced.

Some revival in the primary markets

The improved sentiments and outlook of the equity markets has led to some activity taking place within the primary markets - the market that deals with issuance of new securities - which have gone through a prolonged dry spell for a while now.

As reported by the Economic Times, merchant bankers have begun meetings with large-sized investors - insurance companies, foreign investors, mutual funds and high net worth individuals (HNIs) - to solicit commitments.

A month from now, nearly a dozen equity issuances are expected to hit the market. These would be spread across initial public offerings (IPOs), offers for sale (OFS) and qualified institutional placements (QIPs).

The government's divestment programmes in companies such as National Mineral Development Corporation (NMDC), Oil India and Hindustan Copper are one side of it. A couple of large ticket IPOs as set to hit the markets early next month as well. These include Bharti Infratel, CARE Ratings and PC Jewellers. While the Bharti Infratel IPO would be sized at a massive Rs 50 bn, the other two would be launching IPOs of about Rs 5 bn.

Further, the end of year target of promoters to lower their stakes to the maximum limit of 75% has led to a handful of promoters offloading their excess stakes through the OFS route. Companies - financial and non-financial - are also believed to want to take this route for raising capital.

While market condition have been tough for most part of this year, seeing some revival in activity in the primary market does give out some positive sign. However, it must be noted and as pointed out by the business daily, December is generally a weak month for primary markets given the holiday season in the West. As such, this phenomenon could also be a possibility of meeting deadlines in some cases. Whether this trend will continue in the months to come is something that needs to be seen.

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Feb 23, 2018 (Close)