US-Iran Ceasefire Deal Sparks Hopes for Revival of Primary Market

India's Primary Market Shows Signs of Revival Following Cessation of Hostilities in West Asia

The announcement of a two-week US and Iran ceasefire on April 8 may provide a much-needed boost to India's primary market, which has seen muted activity over the past few weeks. This development is expected to offer respite to several companies that have been waiting for the market sentiment to improve to launch their initial public offerings (IPOs).

The Sensex and the Nifty were trading almost four percent higher following the announcement, indicating a positive response from the market. In the last few months, the primary market has seen a build-up of companies that have filed draft papers with markets regulator the Securities and Exchange Board of India (SEBI). According to data from Prime Database, which tracks the primary market, as of March 20, more than 200 companies had filed draft red herring prospectuses with SEBI. While 138 got approvals, 69 are pending clearances.

Capital market participants, including investment bankers and lawyers, expressed hope that the truce will provide an opportunity to several companies to launch their offers. However, they cautioned that it may be too early to expect a broad-based recovery. Immediate respite may only be for companies that are in advanced stages of readiness, they said.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Companies with good fundamentals and at an advanced stage of the process could try to complete their deals quickly, while others may need to refresh marketing efforts, which would determine launch timelines. Despite the challenging environment, some smaller companies were still able to access the primary markets in March, with eight IPOs launched during the period, compared to seven in February.

IPO fundraising dropped to Rs 5,851 crore in March from Rs 8,161 crore in February. Large trades will remain a challenge, but smaller ones have a high possibility of going through.