Investment is a current sacrifice {Commitment of Funds} in the anticipation of a future benefit {Rate of Return or Growth in Value} An investment is one operation which, upon thorough analysis, promises safety of principal and an adequate return.
KM Vineeth(vineethkmenon@gmail.com), KR Shabu (shabukr@gmail.com) 2

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Physical Assets Real Estate; Bullion; Commodities; Art etc Financial Assets Bank and Post Office Deposits; Insurance; Capital Market Instruments; Derivatives, Mutual Funds, etc

Due to better literacy rates and accessibility there s a well developed equity market in India. Our topic resides there.
KM Vineeth(vineethkmenon@gmail.com), KR Shabu (shabukr@gmail.com) 3

com) 4 .com).KM Vineeth(vineethkmenon@gmail. KR Shabu (shabukr@gmail.

ƒ ƒ ƒ PRIMARY MARKET in equity is where the companies raise funds through Public.com). KR Shabu (shabukr@gmail. INITIAL PUBLIC OFFER {IPO} is a preliminary before getting listed in a stock exchange KM Vineeth(vineethkmenon@gmail.com) 5 . SECONDARY MARKET is the clearing house {Stock Exchange} where the scrips of listed companies are traded. Rights or Preferential issues.

Equity investments are forming the favorite meal to the risk appetite of many investors.com) 6 ƒ ƒ ƒ . IPO investing is good primarily for boom times.com). Fundamental Strengths matter when it comes to long term performance KM Vineeth(vineethkmenon@gmail. are inherently riskier than the secondary market as the companies making IPOs have no previous public record of performance. KR Shabu (shabukr@gmail. IPOs. But. on other occasions it need not meet the expectations. by their very nature.ƒ Among the Different avenues.

!!!!!!!!!} KM Vineeth(vineethkmenon@gmail. KR Shabu (shabukr@gmail. and it·s BEARISH when the market falls« {Ceteris Paribus«i.e.com) 7 . Other things remaining the same««.. it·s BULLISH when the market moves up.To put in technically simple.com).

com). KM Vineeth(vineethkmenon@gmail. as also to provide a mechanism for effective control and supervision of trading. KR Shabu (shabukr@gmail.ƒ ƒ Listing means admission of securities of an issuer to trading privileges (dealings) on a stock exchange The prime objective of admission to dealings on the exchange is to provide liquidity and marketability to securities.com) 8 .

Rs 200 Rs 400).com). A Floor Price and A Ceiling Price e. The offer price is determined after the bid closing date. It is a mechanism when the IPO is open.g.com) 9 . KM Vineeth(vineethkmenon@gmail.ƒ ƒ ƒ Book Building is basically a process used in IPOs for efficient price discovery.e. bids are collected from investors at various prices within a price band (i. KR Shabu (shabukr@gmail.

com) 10 ƒ .com). One year holding period would be exhibiting the average behaviour of the technical's and fundamentals of the scrip. They are assessed on the basis of 1 year price performance at Bombay Stock Exchange [BSE].ƒ The 313 IPOs made during 2005 . KM Vineeth(vineethkmenon@gmail.2009 has been taken as the universe for the study. KR Shabu (shabukr@gmail.

KR Shabu (shabukr@gmail.com) 11 .Return on the Security in % = Where. IPO price) KM Vineeth(vineethkmenon@gmail. P1 ± P0 P0 X 100 P1 = Price at the end of holding period P0 = Price at the beginning (here.com).

00 SHOPPERS STOP 122.Equities that registered a positive rate of return over one year was ONLY 21 OUT OF 62. ƒ Equities with more than 50% return include ƒ BOMBAY AYON 260.78 {11 ut f 21) KM Vineeth(vineethkmenon@gmail.88 YES BANK 74.43 IDFC 70. KR Shabu (shabukr@gmail.50 GATEWAY DISTRI 180.78 AMAR REMEDIES 109.com) 12 .67 AURIONPRO OL 83.36 PBA INFRA 130.com).81 SAKSOFT 299.89 ALLSEC TECH 97.64 VIVIMED LABS 138.

Equities that registered a positive rate of return over one year was ONLY 33 OUT OF 87.99 INFO ECH RANS 99.25 RAMSARUP IND 173 {18 out of 33) 13 KM Vineeth(vineethkmenon@gmail.com).46 EDUCOMP SOL 58.68 USHER AGRO 284 DEEP INDUS RIES 193. ƒ Equities with more than 50% return include ƒ XL ENERGY 263.com) .65 ECH MAHINDRA 231.38 BAR RONICS 68.11 INFO EDGE 112. KR Shabu (shabukr@gmail.19 EN NE WORK IND 95.40 RADHA MADHAV 147.38 HANUNG OYS 73. DCB 315.81 GUJ S A E PE RO 70.19 VOL AMP RANS 286.03 ESS DEE 243.27 AN IA CONS 161 GODAWARI POER 50.

83 SPICE COMM 58.42 ANLA SOLU IONS 273.09 ORBI CORPORA I 100. ƒ Equities with more than 50% return include ƒ RELIGARE EN ERP 71. KR Shabu (shabukr@gmail.50 CAIRN INDIA 51.47 POWER FINANCE 123.53 ACKRU I CI Y 129.Equities that registered a positive rate of return over one year was ONLY 30 OUT OF 104.15 ANKI ME AL 81.50 ICRA 105.89 ALLIED DIGI AL 125.13 PYRAMID SAIMIRA 91.65 SEL MANUFAC URI 227.38 CAMBRIDGE ECH 67.62 EVERONN EDU 251.98 POWER GRID CORP 68.78 KOU ONS RE AIL 52.90 {20 out of 30} 14 KM Vineeth(vineethkmenon@gmail.50 INDIAN BANK 102.59 BHAGWA I BANQUE 116.53 VISHAL RE AIL 92.17 REFEX REFRIGERA 323.com).com) .

59% KM Vineeth(vineethkmenon@gmail.ƒ THE GLOBAL FINANCIAL TSUNAMI SHOWED ITS COLOUR ON INDIAN MARKETS TOO !!! Equities that registered a positive rate of return over one year was ONLY 1 OUT OF 43. KR Shabu (shabukr@gmail.com) 15 ƒ ƒ .com). Equity with a positive rate return was ALKALI ME ALS 38.

STRONG FUNDAs LEAD INDIA s RECOVERY The fear is evident from the number of IPOs itself ƒ Equities that registered a positive rate of return over one year was ONLY 9 OUT OF 17.83 {5 out of 9} KM Vineeth(vineethkmenon@gmail.45 GLOBUS SPIRI S 77. KR Shabu (shabukr@gmail. ƒ Equities with more than 50% return include ƒ ƒ COX AND KINGS 62.com) 16 .com).93 EDSERV SOF SYS 340.10 JINDAL CO EX 103.07 MAHINDRA HOLIDA 77.

only 21 (34%) have registered a positive rate of return for a one year holding period. only 30 (29%) have registered a positive rate of return for a one year holding period. Out of the 87 IPOs made in 2006.com) 17 .ƒ ƒ ƒ Out of the 62 IPOs made in 2005. KM Vineeth(vineethkmenon@gmail.com). KR Shabu (shabukr@gmail. Out of the 104 IPOs made in 2007. only 33 (38%) have registered a positive rate of return for a one year holding period.

Out of the 313 IPOs made during the Five Year period ( 005.e.com).009). only 1 (2%) have registered a positive rate of return for a one year holding period. KR Shabu (shabukr@gmail.ƒ ƒ ƒ Out of the 43 IPOs made in 2008. i. Out of the 17 IPOs made in 2009. only 94 (30%) have registered a positive rate of return for a one year holding period. KM Vineeth(vineethkmenon@gmail.com) 18 . only 9 (53%) have registered a positive rate of return for a one year holding period.

com) 19 .e. a 12 month beta coefficient has been computed for the 4 top performing securities in relation to the BSE index. The beta coefficient ( ) is less than 1 ƒ For testing the Null Hypothesis. ƒ i. KR Shabu (shabukr@gmail. > 1 denotes Aggressive stocks 0 < <1 denotes moderate relation to the market < 0 denotes Defensive stocks ƒ KM Vineeth(vineethkmenon@gmail.com).H0: There is no relation with the market returns and price performance of IPOs.

70 9 .60 8 -0.com).EQUI Y GLOBUS SPIRITS JINDAL COTEX MAHINDRA HOLIDAYS AND RESORTS EDSERVE SOFTSYSTEMS ƒ 12 MON H BE A COEFFICIEN ( ) -1.com) 20 . KR Shabu (shabukr@gmail.0. the Null Hypothesis is accepted and conclusion derived that the IPO price performance has no relation with the market returns.8956 -1.711 As the beta coefficients are found to be less than 1. KM Vineeth(vineethkmenon@gmail.

com). KR Shabu (shabukr@gmail.BASE YOUR INVES MEN S ON HE FUNDAs ³Only buy something that you¶d be perfectly happy to hold if the market shut down for 10 years.´ ± Warren Buffett KM Vineeth(vineethkmenon@gmail.com) 21 .

ƒ ƒ The Securities and Exchange Board of India (SEBI) was the 1st regulator in the world to introduce and implement IPO GRADING as a mandatory requirement. There is overvaluation How?? KM Vineeth(vineethkmenon@gmail.com). Yet .. KR Shabu (shabukr@gmail.com) 22 .

com) 23 . KR Shabu (shabukr@gmail.ƒ ƒ ƒ ƒ ƒ IPO grade 1: Poor fundamentals IPO grade 2: Below-average fundamentals IPO grade 3: Average fundamentals IPO grade 4: Above-average fundamentals IPO grade 5: Strong fundamentals KM Vineeth(vineethkmenon@gmail.com).

Business Prospects and Competitive Position (i) Industry Prospects (ii) Company Prospects B. Financial Position C.com) 24 .com). Corporate Governance Practices E. Compliance and Litigation History F. New Projects Risks and Prospects KM Vineeth(vineethkmenon@gmail.ƒ ƒ ƒ ƒ ƒ ƒ ƒ ƒ A. Management Quality D. KR Shabu (shabukr@gmail.

ƒ ƒ Despite of all the factors being assessed.com) 25 . the investor needs to make an independent judgment regarding the price at which to bid for/subscribe to the shares offered through the IPO. KR Shabu (shabukr@gmail. Since IPO grading does not consider the issue price. IPO grading is done without taking into account the price at which the security is offered in the IPO.com). KM Vineeth(vineethkmenon@gmail.

KR Shabu (shabukr@gmail.com) 26 .com).KM Vineeth(vineethkmenon@gmail.

KR Shabu (shabukr@gmail. .com) 27 .It s far better to buy a wonderful company at a fair price Than a fair company at a wonderful price.Warren Buffett KM Vineeth(vineethkmenon@gmail.com).

com) 28 .com). meanwhile majority of Private Sector IPOs registered negative rate of returns. KM Vineeth(vineethkmenon@gmail.ƒ As the IPO GRADES are just a formality when the promoter of a company with an Average Grade can price their issue at whatever price band. ƒ We could observe that almost all of the PSU IPOs and FPOs have registered positive returns. provided they are able to properly market the issue. KR Shabu (shabukr@gmail.

Yet.com) 29 . there are good notes and fake notes. but by strengthening our evaluation and monitoring system. ƒ KM Vineeth(vineethkmenon@gmail. we could easily prevent the fake ones that overprice their issue. KR Shabu (shabukr@gmail. We shall not harm the good ones.com). ƒ Hence. an interesting finding is that the top performers in the IPOs are from the private sector.

ƒ PRIMARY MARKET should be for the accumulation of scattered savings into Capital Stock of the Economy. There shall be a proper rate of return for the individuals who put their hard earned money trusting the regulatory framework.com). KM Vineeth(vineethkmenon@gmail. KR Shabu (shabukr@gmail.com) 30 ƒ .

com).KM Vineeth(vineethkmenon@gmail. KR Shabu (shabukr@gmail.com) 31 .

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