Current IPO Valuations May Leave Retail Investors With A 'Bad Taste', Says Dinshaw Irani

Current valuations in initial public offerings appear to be highly stretched and even a small disappointment in the performance could lead to a significant correction in these stocks, according to Dinshaw Irani.

"The retail investor may just go away having a bad taste in his mouth, which is not good for the market," Irani, chief executive officer of Helios Capital India, told NDTV Profit.

The BSE IPO index has surged nearly 48% to a two-year high of 12,756.60, outperforming near 18% gains in the Nifty 50. The year has seen the second highest number of maiden offers as benchmark indices scaled new records.

Irani, however, is optimistic about Indian equities, citing that the state election results aligned the market's expectations. The correction in U.S. yields and the Fed's signal to pivot are the other other positives for 2024, he said.

While the broader markets outpaced the benchmarks in 2023, Irani expects large caps to outperform mid and small-caps. "Our portfolio is leaning towards the large-cap."

Nifty Smallcap and Midcap 100 have surged 53% and 44%, more than twice the pace of Nifty 50, in 2023.

Beyond the indigenisation discussed by the government, India will soon be transformed into a sourcing base for defence, according to Irani.

The focus should be on companies without capacity constraints, he said. "We have identified specific PSU (public sector undertaking) companies and certain private sector companies mainly into this."