INVESTOR apathy towards new listings continues as seen from the decline in the shares of most of the companies that debuted on the bourses this month.
Four of the five initial public offerings (IPOs) listed in the past three weeks are quoting at a significant discount to their offer prices. These companies are Pradip Overseas, Shree Ganesh Jewellery House, Intrasoft Technologies and Goenka Diamond & Jewels.
However, Persistent Systems is quoting at a 26% premium to the offer price.
According to merchant bankers, investors remain wary of new share offerings after many high-profile offerings in the previous months fared poorly. In addition, over-pricing of public issues is also a key reason for the underperformance, they said.
“Market perception about some of the latest IPOs may not have been positive because of their unimpressive industry background. This could have prompted investors to take a cautious view on investing in these companies,” said Jinesh Mehta, executive director, Saffron Capital Advisors, a Mumbai-based merchant banking firm.
Out of the five, Shree Ganesh Jewellery and Goenka Diamond & Jewels are into jewellery, a sector which traditionally attracts low discounting in the market. Pradip Overseas is a textile firm, again a sector on which most investors are bearish because of the rising rupee.
There could be many other existing companies in these industries available at much cheaper valuations than the new players, said Mr Mehta.
Some bankers also blame aggressive pricing as one of the factors behind the disappointing performance.
“A few issues were priced aggressively which prompted retail participants to stay away at the time of offer and also after listing,” said Almondz Global Securities investment banking head Sharad Rathi, without commenting on specific IPOs.
He also said many high net worth investors (HNIs) could have exited their investments on the day of listing, thereby putting pressure on the stock prices.
A look at the allotment data of the five IPOs shows that they attracted large HNI subscription while retail participation was comparatively lower.
For instance, Goenka Diamond & Jewels saw non-institutional subscription (including HNIs) of 2.7 times compared to 0.5 time retail subscription. The stock listed on Friday at Rs 130 against the offer price of Rs 135 per share. It fell sharply on Monday but recovered some ground to close 3.2% at Rs 118.
Shree Ganesh Jewellery House is another stock which is currently trading much lower than its offer price. At Tuesday’s close of Rs 153.5, the stock was quoted at a sharp 41% discount, reflecting lack of interest among investors post listing.
The ShreeGaneshIPO received non-institutional subscription of 3.9 times while the retail portion was subscribed 1.2 times. The QIB subscription level stood 1.4 times. The company reported a net profit of Rs 50 crore on a turnover of Rs 871 crore in the quarter ended March 31, 2010 while the figures stood at Rs 168 crore and Rs 2,956 crore, respectively for FY10.

THE absolute market movement was narrow with an upward bias. The market hit a high of 5255 and low of 5207 before closing at 5232. Moreover, global cues showed positive sentiment with the US and Asian markets closing in green. Indian indices also moved up after the credit policy announcement as it turned out to be positive event. The market welcomed the 25-bps hike in CRR and repo/reverse repo rate against consensus expectation of 50 bps and 25 bps respectively. Banking, auto and real estate stocks rose sharply, reacting positively to RBI’s policy. But the IT sector, led by TCS, dragged indices down despite a better-than-expected results from TCS. Reliance faces resistance at 1110 levels which can be seen from the built-up of open interest in 1120 strike calls.
Implied volatility on Nifty ATM options cracked from 22% to 19%, showing that the market could be stuck in a narrow range of 100 points of 5160-5260 for the next few days. Also, current implied volatilities on Nifty index are one of the lowest seen in the past two years following global volatility indices (CBOE VIX is quoting at 17%).
The 5200 straddle is quoting @Rs 120 with 9 days to expiry, which implies a narrow range for the April Nifty expiry also. The turnover in F&O segment has fallen from one lakh crore yesterday to eighty nine thousand crore. However, a short strangle may work in this kind of range-bound market. Even a ratio spread of 1x5300 long calls vs 4x5400 short calls can be created. It will be advisable for traders to stay on the sidelines till a definite move starts in either direction.
WHAT TO WATCH OUT FOR
INDIA
RESULTS: TVS Motor, United Spirits and Zee News are among the companies that will announce quarterly results
AUDITED RESULTS:
Polaris Software Lab and Hindustan Zinc will declare audited results.
DIVIDEND: Nestle India will consider an interim dividend
WORLD
UK: Labour market data is expected to show another fall in joblessness. UK: Minutes of the April meeting of the Bank of England’s monetary policy committee will be released.

AS we step into the new financial year which marks the beginning of the earnings season, indications from the derivative statistics are giving bullish signals. To begin with, FII inflows and bullishness in crude are external parameters, which are supporting the positive move to
come in the market. From a derivatives perspective, 5200 seems to be new support for the market. There has been a substantial writing which took place in the ‘Put’ option of this strike. FIIs, too, sold some of it. Implied Volatility (IV) has shifted in the lower range which was prevailing in the bull run of 2007. Though not significant, but we have started witnessing unwinding in 5300 Calls and 5400 becoming more active. Nifty futures, too, have seen a formation of fresh long in the April series, as both foreigners and domestic participants are buyers in the cash market. But still, premium in Nifty futures has surged to 16.30 points for this series. All above factors suggest that the resistance level of 5300 has to go and the market may witness 5400-5450 levels in the next few trading sessions.
This journey of the next 150 points in the Nifty may be broadbased. We expect the mid-cap space to outperform large-caps. It’s a long expiry. So, we won’t see much of time decay on the options side this week. There are many mid-cap stocks, which are trading at their support levels and have liquidity in Call options. With IVs at lower levels and the time decay not an issue for a week, we suggest buying at-themoney Calls in stocks like IDBI, Suzlon, RNRL, and Unitech.

DOMESTIC money managers are gradually warming up to ‘wrap-like’ portfolio structures that are popular in developed markets. Wealth managers and brokers have begun offering portfolio management services (PMS) with mutual fund units as the underlying.
Known as ‘mutual fund wraps’ or ‘PMS fund of funds’, this product works on the same principles of highly-customised PMS schemes and is meant exclusively for affluent investors. In developed markets, mutual fund wraps are ‘do-it-yourself’ products and are ‘non-discretionary’ in nature. In non-discretionary portfolios, investors have the freedom to select funds of their choice. That is, they can structure their own portfolios, using third-party wrap platforms, with the help of an external investment expert.
In India, MF wrap providers offer discretionary portfolios where the wealth manager or broking firm will decide on investment strategies. The ‘wrap structure’ is managed like a ‘fund of fund’ that invests in diverse schemes and sectoral themes run by different fund houses. Edelweiss Capital, Bonanza Portfolio, Emkay Global, Motilal Oswal Financial, Ifast Financial (through online) and NJ India Invest are among the top providers of ‘MF wraps’.
“Our portfolio has mutual fund units of 5-10 asset management companies, covering various sectors, themes and investment strategies. Our investment coverage is restricted to 25 top equity funds (plus some debt exposure). Single stock exposure will not exceed 6% in our portfolios,” said Hiren Dhakan, associate fund manager, Bonanza Portfolio.
Under ‘wrap’ portfolios, the broking firm accepts a sizeable investment, generally between Rs 5 lakh and Rs 25 lakh, from the investor, to be deployed in an array of equity schemes. The broking firm also takes a power of attorney from the investor, empowering the firm’s investment manager to manage the portfolio. The broker charges anywhere between 1% and 2% of net investment as annualised management charges. Some broking firms also stake claim to a small portion of profits derived from investments. Most ‘MF wrap’ providers declare portfolio NAV at the end of the day.
Wrap fund managers expect to generate 25-30% returns over a threeyear period. Investment tenure in ‘wrap MFs’ could be 3-5 years. If an investor withdraws his funds before one year, he will have to pay an exit load.
“We’re offering non-discretionary wrap schemes to our clients through the Ifast interface. Using our portal, investors can buy multiple units of any fund house by giving just one application and cheque. A non-discretionary model helps the investor have a portfolio to his liking and risk profile,” said Rajesh Krishnamoorthy, managing director, Ifast Financial.
AT YOUR SERVICE
In the West, MF wraps are ‘do-it-yourself’ products Investors have the freedom to select funds of their choice Edelweiss, Bonanza, Emkay, Motilal Oswal Fin are among top providers of ‘MF wraps’ here