The central bank today said policy reform measures have boosted the secondary market but further steps are required to revive the “sluggish primary market”.
The Reserve Bank of India (RBI), in its 'Macroeconomic and Monetary Developments Second Quarter Review 2012-13' review, said that the revival in the primary market will help ease financial constraints for corporates investments.
The central bank in the policy document acknowledged that the global liquidity conditions and the recent policy measures announced by the government have helped improve the sentiment in the equities market but the IPO scene continues to remain sluggish.
During the July-September quarter, the benchmark Bombay Stock Exchange (BSE) Sensex gained nearly 8%, however, resource mobilisation by way of IPOs was down over 50% during this period.
“The IPO market remained subdued due to weak investment demand arising from the slowdown in overall economic growth, persistent inflation and high fiscal and current account deficits,” said RBI.
The central bank also attributed poor performance of IPOs listed during 2011-12 and slowdown in the global IPO market for the sluggishness in the Indian primary market.
“Many of the IPOs listed during 2011-12 are currently trading below their issue price. As on October 25, 2012, of the 34 IPOs listed in the equity market in 2011-12, 20 were trading below their issue price. Negative returns on IPO investments have adversely affected investor sentiments,”said RBI.
“Global IPO activities have also been subdued since 2011. During Q2 of 2012-13, the resources raised through global IPO markets were 48% lower than in the previous quarter, even though the secondary equity market posted huge gains during this period,” it added.
