The Hindu Business Line : IPO allotment drags PSU stocks

SHARES of IPCL, CMC and IBP have been witnessing selling over the last few days despite the public offers of these companies being oversubscribed. Brokers said selling is mainly from investors, who were allotted shares from the recently concluded public offer of these PSUs.

Brokers said selling is from the retail investors who were offered shares at five per cent discount to the offer price. Selling from institutional investors is also seen but that was not heavy.

The government offered IPCL shares at Rs 170, CMC at Rs 485 and IBP at Rs 620. On these prices, retail investors were offered discount of five per cent.

A look at the price movement of these companies since March 8 shows that IBP stock has fallen from Rs 674 to today's closing price of 604.50. With today's closing price, the stock has fallen below the offer price of Rs 620.

Similarly, IPCL has fallen from Rs 225 to Rs 188.65 and CMC fell from Rs 593 to Rs 538.70.

During the same period, the BSE Sensex is down from 5935.19 points to 5535, a fall of 400 points (6.7 per cent) and S&P CNX Nifty by 135 points (7.16 per cent) from 1885.25 to 1749.85.

Brokers said the selling by investors is due to the uncertainty in the stock market. "Investors are happy with 10-15 per cent returns in a short period of time rather than waiting for longer period," said a dealer with a domestic broking firm. He said in the last two months there has been huge erosion in the value of investors' portfolio and that they are happy making marginal profits.

There has also been selling in the shares of Dredging Corporation and GAIL (India). But investors are yet to receive the shares of these PSUs. Brokers said investors are likely to get Dredging Corporation shares later this week and GAIL by next week.

ONGC stock is an exception till now which has seen active buying after the closure of the issue. Brokers attribute this to the buying by FIIs, as they are unlikely to get full allotment of shares from the public offer.