Stock market crash: When will Dalal Street bottom out? Explained with 5 IPO trends | Stock Market News

Stock market crash: The Indian stock market has fallen for the last six sessions. Amid intensified selling across indices and segments, investors eagerly await a turnaround in the Indian secondary market. Though it is difficult to time the market, one can look at the primary market to sniff when a bull market may top out or when a bear market is mulling to bottom out. According to stock market experts, the IPO market is an indirect reflection of the secondary market. Hence, those who closely follow the primary market may have a chance to sniff the secondary market’s mood. They said that the IPO market fizzles out, and the flow of public issues dries down during a bear-hit market in the initial phase of a stock market crash. 

The IPO listing starts around the fair value as the bearish sentiment intensifies. So, companies proposing their shares at higher valuations start paying the price in a bear-hit market. However, a time comes when a fairly valued IPO also pays the price for weak sentiments on Dalal Street. They advised investors to look at these five hints that the IPO market drops when the secondary market starts gearing it up for making a bottom: the flow of upcoming IPOs going down, IPO listing begins around the fair value, discounted listing despite attractive valuations and fundamentals, lack of liquidity in the primary market, and zero activity in the primary market.

IPO watch: Top 5 signals about market bottom

1] Flow of upcoming IPOs going down: “As the primary market sentiment is proportional to the secondary market bias, promoters postpone their public issue in weak markets and wait for the trend reversal, which leads to a decrease in the upcoming IPOs. This should be seen as a sign of an intensified stock market crash after a long bull trend. However, this happens when Dalal Street starts bleeding, and frontline indices start beaching their crucial supports regularly,” said Anshul Jain, Head of Research at Lakshmishree Investment and Securities.

2] IPO listing around fair value: “In a bear-hit market, the fair value of a proposed IPO becomes important as it is a signal of investors squeezing their exposure in the primary market. Once the IPO listing begins around the fair value of the proposed shares by the company promoters, a smart retail investor sniffs that time has come to book profit and wait for the right time,” said Mahesh M Ojha, AVP—Research at Hensex Securities.

3] Panic spread: “A bear market spreads Panic in the primary market, which leads to a discounted listing of shares despite attractive valuations and fundamentals. This signals that people interested in bottom fishing should be able to sniff and grab. Though it is difficult to time the market, the rate of drying liquidity in the primary market is an important signal about the bulls’ not being in the mood to take on the bears,” said Arin Kejriwal, Founder of Kejriwal Research and Investment Services.

4] Lack of liquidity: “Despite discounted listing, the bottom of a bear-hit market can not be expected until quality IPOs fail to attract investors. When IPOs with attractive valuations and strong fundamentals find it hard to attract investors and low IPO subscription becomes a regular phenomenon, one can expect that the market bottom is around the corner,” Arun Kejriwal said.

5] Zero activity in primary market: “When the primary market fizzles out, promoters stop making its issue public, which finally leads to zero activity in the IPO segment. In such conditions, bears are left with no choice but to book profit as lead managers of the IPO cannot convince their fund managers to invest in the public issue. However, many other aspects signal the possible bottom out; a smart retail investor is advised to become vigilant about the market bottom when he finds no running IPO in the primary market,” said Mahesh Ojha of Hensex Securities.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.