India's IPO market set to break May jinx in Lok Sabha election year

For 1st time during poll cycle since '04, mkts will see IPO frenzy

‘Sell in May, go away’ is a popular market adage. But ‘Don’t sell any new shares in May’ is the best kept secret of Dalal Street that’s set to break. Sample this: the last four General Election election cycles starting 2004 have not seen a single initial public offering (IPO) launch during the month of May. In general, the April-June period during 2004, 2009, 2014 and 2019 has proved to be moribund for the primary markets owing to the election uncertainty. The markets are set to buck the trend this time around, with three mid-sized offerings cumulatively looking to raise in excess of Rs 6,000 crore getting launched next week.

 

Investment bankers say they avoid uncertain and volatile market conditions to launch IPOs as investors seek stability. With markets seeing a spike in volatility before the elections, issuers prefer to wait for a few months before going to the market.

However, the sharp rebound in the market from March lows, the recent success of Vodafone Idea’s mega follow-on public offering (IPO) and encouraging liquidity has given bankers and issuers confidence this time around.

The IPO Blackstone-backed Aadhar Housing Finance will be the biggest of the lot at Rs 3,000 crore, while that of pharmaceutical biotech firm Indegene and travel distribution platform will be about Rs 1,842 crore and Rs 1,500 crore each.

" Election is not a big factor anymore this time. More importantly, we are seeing strong domestic inflows, with retail money pouring into the equity markets. This has given issuers the the strength to launch IPOs in May. The interest among retail and high net worth individual (HNI) investors is expected to remain high," said Ajay Saraf, executive director, ICICI Securities.

 Also, a broader consensus amongst investors on the regime and policy continuity has boosted sentiment.

"Markets don't like any turbulence. And if there is any turbulence in the secondary market, then the primary market activity becomes tepid. There has been no certainty regarding who will come to power during the previous election cycles. This time, investors are a lot more surefooted," said Pranav Haldea, managing director of Prime Database.

From the lows they made in March 2024, the Nifty Smallcap 100 index has rallied 20 per cent and the Nifty Midcap 100 has index 11.2 per cent. Vodafone's FPO was subscribed 6.4 times, and the issue attracted over 1.1 million applications.

"Given the size of the issue and given the challenges the company has been facing, the kind of response adds confidence. Most of the companies coming with IPOs belong to the small and mid-cap segment. Any kind of stability in that segment gives a fiilip to IPOs," said Haldea.

Going forward , the interest rate scenario and geopolitical stability will be key factors investors and issuers will track to determine the IPO market trajectory. Market players said there are several companies sitting on regulatory approvals, which will also launch their offerings after observing the response to next week’s three issues.

"We need to watch out for some of these indications. As of now, the pipeline looks very robust," said Saraf.