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IPO Watch: IPOs Fail to Live Up

The Portfolio of IPO stocks under-performed the markets during the month ended July 21, 2006. While the BSE Sensex gained 0.46 per cent, the portfolio of IPO stocks lost over 5 per cent during the same period. However, it was able to beat the BSE Mid-cap index, which slipped by close to 7 per cent during the month.

The Portfolio of IPO stocks under-performed the markets during the month ended July 21, 2006. While the BSE Sensex gained 0.46 per cent, the portfolio of IPO stocks lost over 5 per cent during the same period. However, it was able to beat the BSE Mid-cap index, which slipped by close to 7 per cent during the month.

For the uninitiated, the portfolio of IPO stocks comprises of 15 stocks which came out with their public offering in the last one-and-a-half years. The idea is to gauge how the strategy of investing in stocks during their public offerings would have fared.

Consider an investor who began creating his portfolio by investing selectively in IPOs since January 2005. If he would have applied for, and was allotted the minimum number of shares in 15 of the prominent IPOs (see the table) that hit the market in the last one-and-a-half years, he would have invested Rs 96,805 in the markets, which would be worth Rs 1.13 lakh by July 21, 2006.

Majority of these 15 stocks posted negative returns over the last one month. The worst hit was Jet Airways which lost in excess of 28 per cent during the one month period ending July 21. Sun TV, on the other, gained close to 12 per cent to be among the few gainers in this list.