IPO flurry continues in India, market overly optimistic in my opinion

I was traveling during the last couple of weeks. My post from nearly two weeks earlier talked about how Indian IPOs are listing with mouth-watering gains and I suggested that the IPOs coming in the week after my post did not seem like they would deliver returns shown by previous IPOs. Here is a link to the post.

Since my post, 8 more companies have filed for IPOs and have come to the market.

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I thought the bottom 4 were just not worth investing. Let us look at the listing gains of the 4 -

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3 out of 4 are trading below listing price and they all listed yesterday. Devyani International is the only one that is trading positively. That too because it is a play on the QSR space in India and has a portfolio of strong brands. Moreover, limited options are available if one wants exposure to that sector. Nonetheless, I still think, fundamentally, buying the stock of a company that failed to report profits in the last 3 years is pointless. Especially when all the food they serve is unhealthy and restaurants such as KFC and Pizza Hut are no longer part of the premium category of restaurants in India.

Since I was traveling I could write about my thoughts on the other 4 IPOs to hit the market. CarTrade was a solid IPO. The company's bottom line has grown well in the past and it is a tech company. Of the 4 IPOs that closed last Friday for subscription, CarTrade and Aptus Value Housing have been well received by investors. The others, while subscribed fully seem to have been a dud. Hopefully, those who applied did so carefully and will get an allotment.

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Nifty has been continuously making new highs during the last week and is trading positively again today. During this time, FIIs have largely been sellers and retail activity is lifting the markets. After all, working from home has benefits of added savings and it is all being hurled at financial markets. Apart from market favorites in the Nifty Index, stocks have not been faring that well. For example, let's take a look at the banking space - a favorite sector among all investors at this point.

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ICICI Bank is the clear outperformer whereas India's largest public sector bank and largest tier 2 bank have lagged the Bank Nifty by a decent margin. The market is clearly running for 2 or 3 stocks in each sector, I those that will be safest in case of downturns. However, I believe the stocks that have risen are massively overvalued.

It is clear that this is a divided market and the rising index does not indicate strength in the broader market. Things can turn sour. Be careful with your investments.

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