The year 2021 was a good one for the primary market, as it was supported by a robust secondary market environment. However, the recent correction has affected sentiment largely.
The Nifty50 index corrected over 11 pc from its record high in October 2021. The correction was warranted due to the excessive run that the market has been on for over 18 months. The rise in expectations of US rate hikes also sent the market’s trend lower.
As many as 62 out of 65 IPOs that were launched in the year created multi-bagger returns, but most of them are now trading at lower levels.
2021 IPO Stock’s Performance
CarTrade Tech share price and Suryoday Small Finance Bank stock price saw a big dip as these were the biggest decliners. These stocks lost about half of their value each.
Paras Defence and Space Technologies, on the other hand, became the top multi-bagger among IPOs. Despite losing 45% from the highs, the Paras Defence share price is still providing 292% gains from the price at which it was issued to the investors in the IPO.
Several other stocks like Indigo Paints, Antony Waste Handling Cell, and Windlas Biotech that had gained so much from their issue pierce have now lost ground as the price slipped more than 40% below the highs.
Thirty-three stocks that were part of the initial public offerings (IPOs) of the year lost over 20 percent from their highs. Some of the companies that saw big drops include Barbecue Nation and Sigachi Industries. These companies, however, still managed to recover from their losses.
Factors that led to Correction
Aside from the Omicron worries, the high valuations have also contributed to the correction. The price went way ahead of the fundamentals of most of the companies and shares started to seem very expensive for the new investors to enter the market.
The money that was already invested needed a reason to book profits and the Omicron variant had created a perfect scenario for most of the investors to book their long-run profits.
Now again, the risks associated with IPOs are coming to the forefront with IPO correction as the recently listed companies around the world are suffering due to uncertainties around the market. The risky investments are the first that take a hit when the market shakes off and corrects the prices.
- In today’s market, where the uncertainty around the market has caused a 10 percent correction, IPOs are among the risky assets that are suffering.
- The industry experts believe that companies with strong fundamentals and reasonable valuations will see robust recovery. Other companies might just trade around the price at which they were issued.
- The more attractive companies will quickly recover from the drawdown but might remain volatile. Despite the fall in the prices, the shares still trade higher than the issue price.
- The IPO newshas been the talk of the town but the recent correction has shaken the confidence of many new investors as the sentiments turned negative with the Omicron variant’s transmission.
How many companies got listed in 2021 in India?
The total number of companies that got listed on the stock exchanges in India was about 65. The primary market has witnessed a record number of IPOs in the year 2021. As a result, the total amount raised by these companies has crossed the 1.18 lakh crore mark. The biggest IPO was that of Paytm’s.
What is the Paras Defence share price today?
The stock of Paras Defence closed at Rs. 752 on 28th December 2021. The issue price of the share was Rs. 175 per share. Despite the fall in prices, the stock is still offering multi-bagger returns to its shareholders.
What is the difference between market correction and market crash?
A market correction is a major decline in prices over one week or one month whereas a market crash involves a major price decline in one day. For instance, if the stock market is 10% down in one month, it is called a market correction. But if the market is down by 10% in one day, it is called a market crash.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.