Investors back in action: Rs 16k cr raised in Indian capital mkt in Q 1

Investors back in action: Rs 16k cr raised in Indian capital mkt in Q 1
The Economic Times, July 19, 2009, Page 3

Anand Rawani NEW DELHI

IF YOU think investors are still shying away or companies have faced problems to raise funds, you must do a reality check. During the April-June quarter, more than Rs 16,000 cr has been raised from the capital markets, a SundayET analysis reveals. This massive amount is about eight times the average daily turnover in the spot market of the Sensex.

When compared to the previous quarter, there is a 218% increase. The SundayET analysis is based on data provided by SMC Capitals.

Out of the total funds, major chunk of the money has been raised through qualified institutional placements (QIPs). Corporates raised Rs 11,258 crore through QIP route. Private investors (PE) were not behind. They also invested a little more than Rs 5,000 crore, which is almost 17% higher than their investment in the previous quarter. Also, India Inc raised around Rs 455 crore through initial public offering (IPO), follow on public offer (FPO), right issue and ADRs/GDRs together.

According to Prithvi Haldea, chairman, Prime Database, QIPs are instruments of bull market. The pricing process and the absence of lock in period of buyers make QIPs attractive for institutional buyers. The pricing of QIPs are based on the average price of the last two weeks, which means in a rising market the price of a QIP will generally be lower than the current market price, which help institutional buyers to make short term gains.

According to Jagannadham Thunuguntla, equity head at SMC Capitals, the mood in the market has changed post the Lok Sabha polls. Going forward, the trend is expected to continue unless there is any global or local shocker.

In fact, funds raised through IPOs have also shown a considerable up side during the quarter ending June from the previous quarter. During April to June, around Rs 278 crore has been raised through IPOs against Rs 24 crore raised during January to March.

However, there has been a dip in the fund raised through right issues and ADRs/GDRs in the quarter ending June 2009 from the previous quarter. Companies raised around Rs 640 crore through right issues and another Rs 208 crore by way of ADRs/GDRs during January-March, whereas, during the quarter ending June, only Rs 154 crore was raised through these instruments.

The sentiments have not just improved in the capital markets but also among the mutual fund investors. The net inflow from mutual fund investors have also gone up. According to the data provided by Value Research, during April-May, mutual fund investors made a net purchase of Rs 184,388 crore, which is more than the asset under management (AUM) of Reliance Mutual Fund, the largest fund house with an AUM of Rs 102,730 crore as on May 29. In the previous quarter — January to March — there was a net inflow of only Rs 2,135 crore.

According to Sanjay Sinha, CEO of DBS Chola Mandalam AMC, investors had moved away from equity earlier as markets were not doing well. Now, as the markets have begun to do well, many such investors are coming back, he said. “The trend should continue. There may be, however, some limitations which may come due to the recent Sebi guideline on variable cost,” he said.