The year 2021 is coming to a close, and you cannot help but notice that this year, India experienced (and still is) an IPO boom of huge proportions. You have to remember one thing, though, as you wade through the reasons behind this: when you think of economics, the majority of decisions taken are nothing but trade-offs. You will, as a result, understand that the present boom seen in IPOs or initial public offerings of firms wanting to list company stocks in the share market is an instance of this phenomenon. The year 2021 has witnessed relatively small companies attracting bids to the tune of hundreds (even thousands) of crores. As the boom continues, let’s assess the reasons behind it.
Explanations of the Boom
Why do you think this boom is currently on? In the last few years, two to be precise, rates of interest on fixed deposits in banks have fallen to all-time new lows. In case you have your savings collected in fixed deposits in banks, you are not earning much, but actually losing wealth. Your savings aren’t meeting growth to match the high rate of inflation in the country. In the backdrop of a pandemic hitting several small businesses and investors seeking returns on deposits, plus a lot of salaries being cut, or worse, employment terminated, a new IPO could just be the solution for the majority of Indians who wish to make a fast buck. From December 2019 till May 2021, demat accounts have increased to 6.10 crores. Consequently, massive amounts of wealth have been dished into IPOs.
Among public listed companies, the huge success of companies like Zomato and some other IPOs has given a message to investors who want to invest in retail markets. Additionally, HNIs who want to invest are getting this message too. The indication is that there are good returns when you apply in an IPO, getting a share allotment, and selling for a decent profit on the day that the IPO gets listed. This has prompted the listing of more IPOs and in turn, the investment in more of them.
Help from the Banking Industry
Economists have attributed the success of IPOs in 2021 to the bullish nature of Indian investors who seem to have had a memory lapse of the crash of the previous financial year. Hence, the tolerance for risk has increased, and for this market to remain in this bullish state, investors are breeding sentiments of optimism, greed and exuberance. These beliefs of investors are only being helped by banks and non-banking finance companies who are prepared to lend investors money to purchase a new IPO.
Ride the Bull
You can make the most of the daring and confidence of the current market scenario by trading with leading broker, Motilal Oswal. If you want to be part of the IPO boom, there’s still an opportunity waiting for you.
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