The recent upsurge in the markets has provided much-needed solace to the investor fraternity. With the Sensex recovering most of what it had lost in 2011 in just a few trading sessions of 2012, the market sentiment certainly seems to have changed. And with the secondary market beginning to look upbeat, how could the primary market stay behind? After a poor show in 2011, the primary market is also bracing itself for a better, or rather, a good 2012. Commodity exchange player MCX planning to raise Rs. 750 crore through its IPO marks the beginning of the positivity. Being the first exchange to get listed on the bourses, it has surely generated a fair amount of curiosity amongst investors.

Will MCX be able to revive the ailing primary market? This is a very important question, as many companies had pulled out their IPOs after the scary performance of the markets in 2011. The Sensex plunged more than 24 per cent last year, which put most companies’ plans to raise money through IPOs on the back-burner. Those that came in performed dismally. 

Around 38 IPOs got listed in 2011, and 29 of those are still trading below their offer price. The worst part was that a few of those were also allegedly involved in a price rigging scam. So, while the performance was already impacted, the price rigging issue further dented the credibility of the IPO market. This led to 29 IPOs, which were supposed to rise over Rs. 32000 crore, being called off during the year. All of this badly hit the fund-raising plans of many companies. The scenario is such that there are companies that have filled their DRHPs since 2008-09 but these are yet to see the light of day.

If the MCX IPO sails through, many sitting on the sidelines will also try to test the waters. This will not only provide solace to the private sector but also to the government, which is still lagging behind the target of mopping up Rs. 40000 crore through divestment in FY12. The Finance ministry has already revived its plans to go ahead with the disinvestment of stake in ONGC and is planning to raise Rs. 12000 crore from a five per cent stake sale. We feel that this will be followed by selling stakes in SAIL too.

As regards the question of whether MCX can revive the IPO market, we cannot expect one IPO to revive the entire primary market. The IPO market’s fate will be decided only on one factor – how much one gets to gain on the bourses from the MCX offer. So, factors that could help the IPO Market going ahead are the right businesses being sold at the right valuations, with something being left on the table for retail investors.

Read DSIJ Detail MCX IPO Analysis Here -  MCX IPO: If Novelty Excites, Go For It! Or Else, Avoid!