Investigation of effect of substantial IPO's existing comparable securities

Abstract

Emerging markets during the later part of their growth see an exponential risk in the capitalization of their stock markets. This comes through an increasing number of IPOs with some of them being a significant percentage of the base capitalization of the market. This implies that during a phase such as Indian is in right now there are several large IPOs which could be a significant percentage of the capitalization of the index. Such large Inflows of fund could affect the allocation of funds to other stocks in the same sector. The aim of this project was to examine if such a reallocation affects the prices of the comparable stocks. This examination was carried out for several large IPOs in Indian but no significant effect was noticed. This could imply that such large IPOs do not bleed the established capital markets for the funds but do get in substantial fresh funds into the system thus negating any possible effects on the prices of the comparable stocks.