IPO rally losing steam?

Nifty50: 16,496 ▲ +45 (+0.2%)
Sensex: 55,555 ▲ +226 (+0.4%)

After showing signs of weakness in the early hours of trade, the markets climbed back into the green and remained positive for the rest of the day. The market breadth was slightly negative, with 27 of the Nifty50 stocks closing in the red.

 Of the Nifty sectoral indices, the IT (+1.7%) and Financial services (+0.4%) closed the strongest today, with the Media (-1.7%) and Auto (-1.4%) being the weakest.

Here are the top stories of the day.

Aurobindo exits Cronus acquisition deal

The pharma major has terminated its agreement to buy 51% of New Jersey-based Cronus Pharma for ₹420 crore. Cronus’ low revenue of $13 million in FY21 had brought the valuation of the company into question. After the above development, the stock jumped nearly 7% intraday, but ceded much of its gains by the closing bell. 

The stock has been in correction mode following a lacklustre Q1 and decline in performance in the US market, which accounts for about half of its sales. The stock has declined ~36% from its lifetime high of ₹1,063, which it hit on 11 May 2021. 

Vodafone’s subscriber count dips further

As per the latest data from the Telecom Regulation Authority of India, Vodafone Idea lost nearly 43 lakh subscribers in the month of June. This is a steeper decline than in the month of May, where the operator lost 40 lakh of its users. 

Meanwhile, Jio added over 54 lakh subscribers in June versus over 35 lakh new users the month before. Airtel’s subscriber base grew by 38 lakh in June, after it lost around 46 lakh customers in May. Their stock prices, too, reflect a similar story. So far this month, shares of Vodafone Idea are down ~28%, whereas those of Airtel and Jio’s parent Reliance Industries are up by about 11% and 6%, respectively. 

Nuvoco Vistas lists at a discount

Shares of cement maker Nuvoco debuted on the NSE at an almost 15% discount to their issue price of ₹570. However, the stock managed to regain some investor interest, and closed 9% higher than its listing price. 

Subscribed 1.7 times, the ₹5,000 crore public received a muted response from investors. Nuvoco joins the growing list of IPOs that are making weak openings on the stock market. Last week, shares of CarTrade and Windlass Biotech listed at discounts of 7.8% and 11.6% from their issue prices, respectively. 

Closing bell

At a time when the IPOs are delivering below-average returns, today’s bounce-back in the markets provided some respite. The bounce also reflects the rise seen in the major international indices as well as in the prices of major commodities such as copper and crude oil. We will have to wait and see whether this bounce is just a reaction to the previous trading session’s fall, or a resumption of the broader uptrend. 

Good to know

What is a lock-in period for an IPO?

A lock-in period refers to a timeframe when investors are not allowed to sell their shares. For anchor or big institutional investors, the lock-in period for an IPO is 30 days after the allotment. This is because they are given the advantage of buying the shares before the IPO is open for subscription. Also, the imposition of a lock-in period helps in providing stability to the share price in the initial days post listing. At the end of the lock-in period, the shares could witness selling pressure in cases where anchor investors pare their holding. 

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