Why a hot IPO market is bad news for investors

Information asymmetry, overheated valuations and speculative intent merge to exacerbate the froth in equities. It usually doesn’t end well for IPO investors.

Circa January 2008. I remember the time as a major turning point in equity markets. The ensuing crash was pinned, rather simplistically, on what was, till then, the largest Indian IPO ever—Reliance Power. The explanation trotted out was that the big headline IPO had sucked out all the liquidity, leading to the crack.

What was ignored was how market cycles play out. The crash was preceded by a stellar bull run that had lasted nearly five years, generating a staggering and unprecedented 50% CAGR for the Nifty 50. A correction was overdue. 

Cut to the present day, and I’m waiting …


Ujval Nanavati

Ujval leads our Business vertical at The Morning Context. In a corporate career spanning 14 years, he has worked across startups, consulting firms, multinational corporations and large Indian companies, including India Infoline, ICICI, KPMG, Tata Steel and Jubilant Pharma. Ujval has been a freelance writer and trainer for eight years, with bylines in Forbes India and The Economic Times.

Editor, Business