The bourses rev up

The spectacular success of the Maruti IPO may have its own downsides, but it has pepped up the moribund primary market and ignited investor sentiment

Mumbai: There were times when more than Rs 20,000 crore used to flow in to the capital markets in a single year. Those were the times when the markets were overheated no doubt, but it was enough to indicate that there is a lot of money out there that could be invested in the capital markets.

In recent years, the primary market has been lying in a comatose state. In 2001 there were only four primary issues; in 2002, five; and in 2003, none till June 12, when Maruti Udyog (MUL) came up with an initial public offering (IPO).

The reason for the lack of investor interest in IPOs is not far to seek. Out of the 24 IPOs listed in the last four years, 20 are trading below their issue price and the majority of the stocks traded above their issue price are bank stocks, about which we had written last week.

More than just a fall in prices, what has scared investors is that there are more than 2,000 companies listed with various stock exchanges that have simply vanished without leaving any trace. The promoters of these companies vanished laughing all the way to their banks leaving their investors crying — perhaps all the way to their graves.

The Maruti IPO, where the promoters will not vanish, and MUL, a company of vintage class, may finally change the investor sentiment — particularly the retail investor sentiment towards the primary market.