Performance analysis of initial public offering in Indian context

Abstract

Initial Public Offering (IPOs) is a company's first offering of equity to public. Initial Public Offer is a major source of capital for firms. In fact, in Indian capital market, IPOs have become the most popular way of raising finance for the firms. The pricing of Initial Public Offerings (IPOs) is one of the more puzzling phenomena in finance. This study intends to examine the price performance of the Indian IPOs listed on National Stock Exchange (NSE), using a sample of 150 IPOs that entered the primary capital market during May 2007 to December 2011. Short run and Long run price performance have been studied by considering the gap of 1 month, 3months, 6 months and 1 year, 2 years and 3 years respectively. The findings reveal that, there exists overpricing in the Indian Primary Capital Market. Secondly, overpricing is more prevalent in the long run time period than in the short run.