The Reserve Bank of India (RBI) on Monday said though policy reforms had boosted the secondary market, more steps were required to revive the "sluggish primary market".
In its Macroeconomic and Monetary Developments- Second Quarter Review 2012-13 report, RBI said the revival in the primary market would help ease financial constraints on corporate investment. RBI acknowledged global liquidity conditions and recent government policy measures had improved the sentiment in the equities market.
The benchmark BSE Sensex gained eight per cent. But, resource mobilisation via initial public offerings (IPOs) in India fell 50 per cent during this period. "The IPO market was subdued due to weak investment demand arising from the slowdown in overall economic growth, persistent inflation and high fiscal and current account deficits," RBI said. It attributed the sluggishness in the Indian primary market to the poor performance of IPOs and the slowdown in the global IPO market.
"As on October 25, of the 34 IPOs listed in the equity market in 2011-12, 20 were trading below their issue prices. Negative returns on IPO investments have adversely affected investor sentiment," said RBI.
"Global IPO activities have also been subdued since 2011. During the second quarter of 2012-13, the resources raised through global IPO markets were 48 per cent lower than in the previous quarter, though the secondary equity market posted huge gains during this period," it added.