For the retail investor, 2011 has been the year of the small initial public offering (IPO), and their memories are likely to be more unpleasant than the other way round.
Many of the floats, which had an average size of Rs147.51 crore compared with Rs430 crore over the previous five years, have swung wildly and hit retail investors who hoped to make quick money in an otherwise dull market say mavens.
The Securities and Exchange Board of India (SEBI) is investigating a number of them to determine if there has been foul play including funds misuse and broker manipulation, according to media reports and two people familiar with the matter.
The regulator is examining data on IPOs after April 1, or
the beginning of the financial year, according to one of these people.
DNA, however, could not independently confirm this from Sebi.
If Sebi does indeed examine issues from the beginning of the financial year, it will have to look at 32 floats. Of these, investors have suffered losses in 18.
While the Bombay Stock Exchange Sensex has dropped 20.95% since the beginning of the calendar year, 10 of these stocks have fallen 60% or more.
RDB Rasayans has dropped 90.92%, Taksheel Solutions has fallen 89.50% and Bharatiya Global Infomedia is down 87.23%, calling to question the valuation methods followed for pricing the issue.
Four stocks have gained in excess of 60% in less than 10 months of their listing — Rushil Décor is up 95.76%, Aanjaneya Lifecare is up 86.86%, Onelife Capital Advisors is up 83.73% and Lovable Lingerie 78.49%.
SP Tulsian, independent investment advisor, suggests that investors stop trying to benefit from stocks that exhibit volatility without any fundamental reason.
“Retail investors share some of the blame. Despite a lot of warnings about staying away from unknown companies they get attracted to the momentum of a stock, thinking that they may exit it before the cycle turns,” he said.
Arun Kejriwal, director of Kejriwal Research & Investment Services, believes people should not be attracted to a company only because it is highly volatile or has corrected severely from a high level.
“A stock without fundamentals is not good at any price, it should just be ignored,” he said.
Incidentally, the companies which have hit the market have done so in a year when the amount of money raised through the equity route is the lowest since 2003, when equity market fund raising was Rs2,877 crore.
The amount of money raised through all these equity routes so far in 2011 is Rs24,955 crore.
Every year since then has seen in excess of Rs30,000 crore raised from the equity markets. Last year saw the highest-ever fund raising at Rs1.04 lakh crore.
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