Sign In
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
New Delhi: SME IPO in the Indian stock market can be an attractive opportunity for investors to give fast returns. Tales of grand gains on the day of listing have attracted many investors. However, many stark revelations have been made in the research of the Reserve Bank of India (RBI). According to a recent study conducted by RBI, an important fact has been revealed in the performance of shares of SME IPO listed in the last two years (FY24 and FY25). This study found that most of these SMEs appeared to be making great profits on the first day of stock listing, but this glow could not last long.
After listing, the performance of these stocks was extremely unstable and in many cases it was not possible to maintain this profit. Simply put, these stocks carry high risk for long-term investment despite initial enthusiasm.
The RBI study compared the returns of SMEs and Mainboard IPOs across four different tenors — one week, one month, three months and six months. The results show tremendous differences in risk and returns between the two segments. In the first week of listing, the returns of both SME and Main Board IPOs remain around zero on average, but prices in SME stocks fluctuate much more. After a month, most companies suffer losses, but select SME IPOs offer such high profits that the average return gap becomes less visible.
The difference becomes apparent after three months. The returns of the Main Board's IPO remain within a limited and predictable range, whereas the returns of SME IPOs are extremely uneven. Some offer very high returns, others remain completely zero or at a loss. Six months later this difference becomes clearer. Main Board IPOs offer stable and modest profits, whereas some SME IPOs give high returns, but there are a large number of such where investors do not get anything or lose.
The study states that due to the high demand for some SME stocks and the limited number of shares, investors push their prices far above the actual value in the race to buy them. In the lure of making fast profits, small investors ignore the financial health and fundamentals of the company, which increases the value of the shares even more. A study of 100 SME IPOs listed in the last two years also revealed that about 20 percent of the shares were costlier than their industry average price.
The RBI study also shows that betting is increasing due to small investors running after quick profits in SME IPO. NSE figures show that investors under the age of 30 now account for about 39 percent of the market, up from just 22.6 percent in 2019.
(Disclaimer: This article is only meant to provide information TV9 does not recommend buying or selling shares or subscriptions of any IPO Mutual Funds gold and crypto assets)
