Initial public offerings (IPOs) and follow-on public offers (FPOs) have received overwhelming response from retail investors and non- QIBs from the West while the response from the South towards these public issues has dwindled over the last 10 years.
Response to these public issues from the West has doubled from 47 per cent in 2001-02 to 80.2 per cent in 2010-11.
The South has seen a decline in response from 15.8 per cent in 2001-02 to 3.8 per cent in 2010-11, showed a data from Prime Database.
In terms of the amount too – the response to these public issues in the West has increased from Rs 3,796 crore in 2001-02 to Rs 2.03 lakh crore in 2010-11. Amount-wise the response to public issues has increased in the South from Rs 1,268 crore in 2001-02 to Rs Rs 9,679 crore in 2010-11.
“The West has generally given good response to public issues so it is not a surprise that the responses have doubled. The main participants from the West are primarily cities like Mumbai and Ahmedabad. This region has more investors who have a larger risk appetite,” said Mr Sundar Rangan, Head - Merchant Banking, Arihant Capital Markets.
City-wise turnover of the National Stock Exchange (NSE) in the capital markets shows that Ahmedabad makes up 6.20 per cent of the turnover while Mumbai/Thane makes up 58.60 per cent of the turnover in 2010-11. This percentage can be compared with the city-wise turnover of 3 per cent and 52.43 per cent turnover in 2005-06 as available on the NSE website.
“Also, the West has always had the equity culture since the West is much closer to the stock markets and therefore awareness is more in the region,” said Mr Rangan.
Most merchant bankers believe that the South is a more conservative region and most investors are risk averse. “In 2001-02 there was a lot of Information Technology (IT) influence. Many of these IT companies were from the South and therefore these public issues got good response from that region. This explains the participation levels at that time,” said an investment banker.
NSE 2001 data shows that the top traded securities in that year were – Infosys Technologies, Satyam Computer (Now Mahindra Satyam), Digital Equipments and Wipro, all belonging to theIT segment.
“If you were to see zone-wise response to bonds, there you will see a higher allocation towards these from the south. Around 25 to 30 per cent response to bonds will be from the South,” he said.
Data shows that response from the North and the East regions has been more or less consistent.
Analysts say that investors from regions in the North like Jaipur are mainly speculative investors.
This means they will invest heavily when the markets are good but will completely refrain during bad times.