The bounce in equities today may have come in time for high networth individuals who had leveraged their portfolio to subscribe to the initial public offering of SBI Cards and Payments Services, and would have faced high losses when the shares of the company list on Monday..
The interest cost for such investors is seen at an annualised rate of 12-15%, which is unlikely to be recovered given the expectation that SBI Cards and Payments' shares will debut on the bourses at a discount.
The expectations from the listing of shares of a subsidiary of the State Bank of India were exuberant two weeks ago, when the initial public offering received a stellar response from institutional and retail investors.
However, the recent carnage in domestic equities eroded most of the grey market premium on the shares as investors have turned averse to risky bets, in the backdrop of deteriorating economic growth outlook.
"It will go on a discount, considering the current market conditions. However, it will be difficult to portray what will be its opening price," said an official with one of the investment bank to the issue.
Analysts believe India's private consumption story is likely to remain weak longer than anticipated earlier as discouragement to non-essential travel and the rapidly spreading pandemic has hit consumer sentiment, dissuading them from discretionary spending.
"The response is expected to be subdued as there is too much volatility," said an investment banker with a large state-owned sponsored-investment bank.