It is a good news for Govt of India as Coal india IPO is subscribed 12 times by QIP segment but response is poor in retail.
This is one news item in equity master:
Take the Coal India IPO for instance. Millions of investors are scrambling to get a slice of this IPO. It's not only because this IPO is the biggest in India so far. There are other factors too driving this enthusiasm. For starters, the US and Europe are still down in the dumps. Thus, foreign investors are putting money by the dozen in emerging markets in India. The perception then is that stockmarkets in India will continue to rise. As a result of which IPOs would also yield attractive returns. So strong is this mindset, that investors have begun treading on dangerous ground. They are borrowing in this bull market to invest in new issues.
In this regard, an article in Economic Times has quoted a trader - "I decided to take a Rs 9-crore loan for the Coal India IPO so that I can leverage my own fund of Rs 1 crore. This would increase my chances of getting more shares in the allotment 10 times and help me make a killing."
Surely, a 10% gain (assuming that he get entire allocation of Rs 10 crore) can double his net worth almost overnight but a 10% fall can also wipe out his entire net worth. And it is this downside that he is not paying any attention to. Indeed, this kind of speculation is what has led to the downfall of many investors in the past. And is bound to do so in the future. "
Tread carefull in IPOs . Better to go for known secondary market shares where PE multiples are less than 8 or so. This will safeguard your hard earned money. Refer my previous recommendations and go for sound investment as some institutions manned by inefficient people sells good shares and purchases dud shares thus bringing down the institution to dust.
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