Developed markets such as the US and Japan may have been leading the recovery in the financial markets till 2008, but this trend seems poised to change in favour of emerging markets if one goes by what global fund managers feel.
According to a recent Ernst & Young (E&Y) survey on the global Initial Public Offer (IPO) market, emerging markets such as India, China and Brazil are set to lead the recovery. A majority of fund managers surveyed thinks the recovery in these three markets will happen between the third and fourth quarter of fiscal 2009, while for developed markets like the US and Japan, a proper recovery can only be expected around late-2010 or 2011.
The findings of the survey for India reveal that mid-cap companies will lead the pack in reviving the primary market followed by large-cap companies. Within this category it is the PSU disinvestment and the power, real estate and infrastructure sectors that will dominate. “PSU disinvestment is going to be a big driver in the IPO market,” says R. Balachander, Partner and IPO Leader at E&Y. The government recently announced a minimum public float of 10 per cent in all listed PSUs. It also agreed to list all PSUs making profit in the last three years. Balachander expects the government to raise Rs 25,000-40,000 crore through these disinvestments by the end of 2010.
However, the survey reveals that only 28 per cent of investors are likely to increase their investment in IPOs in India in the next 12-18 months. In order to attract more investors, Balachander suggests that the government should give a discount of 5-10 per cent to retail investors in the disinvestment process.
