PUBLIC OFFERING (IPO) UNDERPRICING IN THE CONTEXT OF THE INDIAN STOCK MARKET

Abstract

       This study delves into the phenomenon of IPO (Initial Public Offerings) under-pricing in India and its implications on Nifty 50 index, both pre-pandemic and during the pandemic, with a specific focus on categorizing IPOs into three sectors: industrial, financial, and service. To analyse this, we employed the Market Adjusted Abnormal Return (MAAR) and Ordinary Least Squares Regression (OLS) model, which allowed us to investigate how market return, listing gain, oversubscription, issue price, and issue size impact IPO under-pricing and its subsequent effect on the Nifty 50 index. The results obtained through the OLS analysis revealed that, except for market index return, all the aforementioned factors exerted a significant influence on IPO under-pricing. Furthermore, we conducted t-tests to assess Market Adjusted Abnormal Return, calculated separately for each sector. This analysis revealed a significant degree of under-pricing in IPOs of industrial, financial, and service sectors. Our research underscores the fact that investors tend to prioritize the short-term profitability of IPOs over their long-term performance. These findings serve as valuable insights for investors seeking to navigate the complexities of IPOs and their initial returns.

Keywords: Initial Public Offerings; Under-pricing; Listing Gain; Pre- Covid; Post Covid; Nifty 50

JEL Classification: G01, G1, G120