Random thoughts on the IPO Market and Market Tops

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In 2008, Reliance Power came out with a massive public issue. At that point no one could have called it a peak but in hindsight that became the peak due to the fall in the US markets which set the ball rolling downwards across the world.

From that point onwards big issues are seen as a probable peak point though no one seems to know which IPO. These days every IPO seems way too overpriced making even the Reliance Power issue relatively a value pick. But markets seem to ramble on with even more ridiculous IPO being able to list at valuations that in other times would make no logic.

Does anyone remember which IPO was the peak in the Dot Com bubble? The peak came without any large IPO hitting the market. One day we were hitting upper circuits and suddenly another day we were hitting lower circuits.

These days analyzing IPOs is a total waste of time. Investors loading in for the IPO aren’t there because of their belief in the company. It has more to do with listing returns. Even analysts whose job is to track and analyze have run out of reasons to recommend buys on such offers unless they assume linear growth for decades to come.

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At some point of time, every bull market loses its legs. While we could causate the reasons behind why it fell on such and such a day, it most probably is because the marginal buyer stopped buying. 

Every high there seems to be dramatic predictions (some veiled, some not so) about a forthcoming crash. The other day a friend mentioned how his friend’s kid and other kids he knew were now opening trading accounts and whether this could be a signal of a top.

Like the dinosaurs which went extinct in the Cretaceous age, so too shall the IPO’s. But unlike the dinosaurs, they shall come again back in force for we had seen similar trends in IPO’s in 1995, 2000, 2007 and who knows 2021?

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Prashanth Krish

Prashanth Krish

Prashanth is a Chartered Market Technician who believes in the Systematic Momentum Investing strategy. He runs his own portfolio advisory firm - Portfolio Yoga.
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