IPO subscription dynamics: A comprehensive inquiry into the Indian stock market

Abstract

The Indian IPO market showcased resilience during the global stock market downturn in 2022, emerging as a notable bright spot in regions such as Europe, the Middle East, India, and Africa. As the bullish rally of 2022 persists, Indian stock markets remain enticing for foreign institutional investors in 2023. A resurgence in IPO activity is anticipated, driven by increasing momentum and larger deals that are poised to overcome the constraints of subdued global sentiments and liquidity pressures, addressing the challenges posed by these factors. The study offers insights into factors influencing IPO subscriptions, capitalizing on the context of heightened stock market volatility and optimistic trends in the Indian stock market. A total of 132 IPOs listed on the Indian stock market between April 2019 and March 2023 were analyzed in this study. Multiple Linear Regression was used to assess the strength of the association between several factors outlined in the literature, and the overall subscription. Among the ten variables investigated in the study, it was observed that three variables under the external factors, specifically Grey Market Premium, IPO Rating, and Broker Recommendations, exerted a significant influence on the overall subscription. While other factors such as allocation proportion and issue attributes, were found to have no discernible influence on the overall subscription. The results indicate that the Indian IPO market demonstrates a prevalence of speculative behavior and a stronger reliance on expert recommendations, rather than being primarily driven by IPO characteristics. Acknowledgment Authors acknowledge that the publication fee is funded by Kingdom University, Bahrain.

Keywords

• broker recommendation
• grey market premium
• index returns
• IPO allotment
• IPO issue
• IPO rating