IPO Chasing Market Highs in FY21
Despite Covid-19 disruptions hitting businesses globally, Primary markets in India witnessed strong activity in the ongoing financial year 2021. Typically, IPO listings depend on the secondary markets and as a matter of fact, there were no new IPO launches or stock market listings in the first half but the second half of the financial year rewarded investors as equities made a resounding recovery.
According to Prime Database, eighteen of the 23 IPOs so far this year saw first-day gains. That represents 78% of the total stock listings in the financial year 2021 as compared to only 69.23% of the total 13 IPOs in the financial year 2020 and 53.3% of the 15 IPOs in financial year 2019 saw listing gains.
As market sentiments have revived after the Covid-19 pandemic, around Rs 1 lakh crore of public issues (excluding LIC) are waiting to hit the markets in the near term as markets are likely to continue Bull Run in the next financial year as well.
Mutual Funds continue selling in Feb 2021
Mutual Fund investors pulled out Rs 16,306 crore from equities in February 2021, making it the ninth consecutive monthly outflow as smaller investors booked profits amid a rally in Indian stock market.
On a month-on-month basis, mutual funds withdrew Rs 16,306 crore from equities in February as compared to Rs 13,032 crore in January 2021, reflecting an increase of 25%.
With many investors starting to directly participate in equity markets, the success in the rising bull market and the poor performance of many mutual funds have further caused investors to withdraw money from equity mutual funds.
The trend of withdrawing money from equity mutual funds could continue till the rally in the stock market slows down and begins to consolidate, thereby giving investors the opportunity to put their profits into longer time frame instruments like mutual funds.
Private players likely to hold 51% stake in AMC
State-run banks who are working on the ‘bad bank’ want private companies, including asset managers, to own a 51% stake in the asset management company (AMC) whereas the public sector to have a 49% stake.
The plan for a bad bank was proposed during the Union Budget 2021. This entity will absorb stressed assets of lenders and will be set up as an asset reconstruction company (ARC)/AMC.
Indian banks are burdened with toxic assets of Rs 7.38 trillion, and the pandemic is expected to cause an increase in bad assets. Thus, the government’s plan of creating a bad bank to house unpaid loans of Rs 500 crore and above in the form of an ARC/AMC will help to manage and recover some of the capital.
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