The Third Eye of Investor

It's raining IPOs right now and days are as busy as it could get for IPO players and analysts. A lot of people I know are applying in all the IPOs and I understand the reason behind this frenzy. Most of the recent IPOs gave good listing gain to investors, which gave a sense of confidence to retail investors and hence most of them are applying blindly as  Stocks only go up!! If you are also one of them then you can take an edge over most by just analyzing few things and then you can make an informed decision. Now, if you are applying just for listing gains, then this article might not help much as listing gains are purely based on sentiments and not necessarily on underlying business or fundamentals of the company. However, a company with good fundamentals and if available at reasonable price might give good listing gain and you can even hold that for long term. So, let me share the main points which I consider before applying in an IPO.   Understanding the business and ri...

March is going crazy with IPOs. There is a long list of companies coming up with initial public offer. to raise funds. So, you must be wondering, why is it that so many companies are lining up for money at the same time. Let's discuss this. There could be various reason to it but following are also very obvious reasons: 1. Surging retail participation in equity markets - This is really good for companies planning an IPO as this can give easy exit to Private Equity investors and at times gives opportunity of encashing high valuations to the promoters also. 2. Response to recent IPO listing - This is a confidence booster. Almost all the recent IPOs were oversubscribed and listed at bumper price, way above its IPO price, which was already overvalued in most of the cases. Let's have a look at current price of recently listed companies.   Source: StockEdge We can see that most of the companies are trading at a price which is lower than listing price in most of the cases and even b...

Stock markets across the globe have fallen recently due to rising bond yields. Let us understand the relation between bonds and equities and try to figure out whether this fall will continue or it is just an overreaction of slight increase in bond rates and markets will rally again. Nifty - Last 5 days chart Government bond yield - Last 5 days chart Bond yield and equities have inverse relation, in general which we can see in published charts. However, it is not absolute relation because equities can move up or down due to a lot of other factors also but recent fall was primarily due to concerns over increasing bond yields. If bond rates are high, it is very obvious that few investors will move to bonds from equity as it is safer option and your capital is protected.  Stocks are risky by nature. You can lose your entire capital forget about dividend or capital appreciation. Whereas bonds are secured, in general and if it is government bond then of course it is backed by government ...