The Indian Initial Public Offering (IPO) market is experiencing a period of unprecedented activity. Companies across diverse sectors are capitalizing on the optimistic market sentiment to raise funds for expansion and strategic objectives. This influx of IPOs, while attracting significant investor interest, has also raised concerns regarding potential overheating and the role of regulatory bodies like SEBI (Securities and Exchange Board of India).

A Surge in Listings

The first half of 2024 has already witnessed a substantial number of companies going public, surpassing the total IPO activity for previous entire years. This surge can be attributed to several factors:

• Robust Market Performance: The Indian stock market has exhibited exceptional performance, with key indices scaling new highs. This bullish sentiment motivates companies to list their shares, confident of attracting investor capital.
• Ample Liquidity: Easy access to credit and abundant liquidity within the financial system empower investors to actively participate in IPOs.
• Evolving Regulatory Landscape: SEBI's initiatives to streamline and enhance the efficiency of the IPO process have further invigorated market activity.

SEBI's Response: Ensuring Market Stability

While the IPO boom is a positive development for the Indian economy, SEBI is undertaking proactive measures to ensure its sustainability and safeguard investor interests. Some key interventions implemented by SEBI include:

• Scrutiny of Issuance Pricing: SEBI is exercising close scrutiny over the pricing of IPOs to mitigate the risk of excessive valuations that could lead to post-listing corrections. For example, Paytm’s IPO indeed faced scrutiny due to concerns about overvaluation and withdrawal of OYO IPO application due to overpricing.
• Investor Protection Measures: SEBI has introduced stricter disclosure norms and mandated lock-in periods for promoters and anchor investors, fostering investor confidence.
• Emphasis on Corporate Governance: SEBI is emphasizing robust corporate governance practices among listed companies to ensure transparency and accountability.

Investor Considerations in a Dynamic Market

The IPO frenzy presents both opportunities and challenges for investors in the Indian market. Here's a breakdown of the potential impact:

• Investment Avenues: The multitude of IPOs offers investors the opportunity to diversify their portfolios and potentially benefit from the growth trajectories of new companies.
• Potential for Substantial Returns: Early investment in successful IPOs can lead to significant gains, particularly in a rising market.
• Overvaluation Risks: Investors need to exercise caution regarding excessively priced IPOs that may not deliver on their promised returns.
• Importance of Meticulous Due Diligence: Thorough research into the company's financials, business model, and future prospects is paramount before investing in an IPO.

Looking Forward

The Indian IPO market is expected to maintain its buoyancy in the coming months, with a robust pipeline of companies lined up for listing. However, it's crucial for investors to maintain a balanced approach. While the potential for high returns is attractive, careful evaluation and an acknowledgment of potential risks are essential for navigating this dynamic market. SEBI's proactive measures are likely to ensure the stability and long-term growth of the Indian IPO market, fostering a healthy environment for both companies and investors.

VISMINIDA, trained our students how to control emotion in stock market, how to use strategies in different situation to control risk in stock market specially in future and option segment.

We will Cover the following topics in Advance Derivative Analysis.

What is Derivative (Future and Option)

Future and option are derivative products in the stock market. When two parties make a financial contract, where they agree to buy or sell the underlying asset at a agreed price on a specific date (Expiry Date). The reason for making this contract to hedge the risk involve in the stock market.

Uses of Derivatives

Uses of Derivatives include:

• Generating option ability
• Providing leverage facilities
• Hedging risks in the underlying
• Obtaining exposure for the underlying assets
• Switching asset allocations between the different classes of assets
• Speculation and generating profits

Underlying in Derivatives

• Stocks/ Shares/ Equity: A share is an indivisible unit of capital that expresses the ownership relationship between the shareholder and the company.
• Currency: It is a medium of exchange for goods and/ or services. It is the money in the form of coins or paper notes which is usually issued by the government and generally accepted at its face value.
• Commodity: It is a basic interchangeable good which can be used with other goods of the same type.
• Interest Rate: It is the amount of interest due per period, as a percentage of the lent, deposited, or borrowed amount, also called the principal amount.

Advantages of Derivatives

Non-binding Contracts

When an investor invests in the derivative contracts in the open market, it is considered that he is purchasing the right to perform it. However, there is no obligation on him to perform its option. Therefore, there is an advantage of non-binding contracts and it offers a good deal of flexibility in performing the investment strategy.

Leverage Returns

Investors become capable of making extreme returns that may not be possible with primary investment instruments like stocks and bonds. Unlike stocks, when investors invest in the derivative markets, it does not take a long period of time to double the money.