homemarket Newsstocks News'800 pound gorilla' LIC's IPO won't drain out market liquidity directly from small investors: Shankar Sharma
'800-pound gorilla' LIC's IPO won't drain out market liquidity directly from small investors: Shankar Sharma
Shankar Sharma tells CNBC-TV18 that he doubts if new investors in the market are going to be jumping at the IPO market anytime soon "even if it is LIC".
Market veteran Shankar Sharma is of the view the upcoming mega IPO of Life Insurance Corporation (LIC) will drain out market liquidity but not directly from small investors. In an interview to CNBC-TV18, he said demand for the LIC IPO may not come directly from the retail category.
His remarks come at a time when LIC is gearing up to launch an initial share sale to raise an estimated Rs 63,000 crore for the government. The proposed LIC IPO is likely to hit the Street in March.
"I doubt if the new entrants, the 4-5 crore new demat account holders, are going to be jumping at the IPO market anytime soon, even if it is LIC... because obviously a lot of stupid decisions were made by a lot of uninitiated investors in new-age companies," he said.
Instead, the demand has to come from mutual funds and foreign portfolio investors (FPIs, he said.
"I have been in this business for 30 years and have often scratched my head when FPIs go, or FIIs back then used to go, and put money into all kinds of (companies) really... I am not saying LIC is one, but talking large-cap company IPOs when they have no solid fundamentals and what they would say doesn't matter... We have to be investing in the largest or the large companies in a country," the market expert elaborated.
Sharma - known more for his bearish calls than bullish ones - had earlier told CNBC-TV18 that one should not be surprised if stocks of new-age companies fall 80-90 percent by the end of 2022, as investors continued to dump shares such as Zomato, Paytm, Nykaa and CarTrade.
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'LIC, the 800-pound gorilla'
"LIC is the big 800-pound gorilla, they will put in money even though the stock might lose money after the IPO... That's okay; that's the way institutional investing works. You cannot sit out a huge IPO like LIC's."
#OnCNBCTV18 || Shankar Sharma says that he doesn't think #LICIPO will drain out liquidity from the market, #Nifty hasn’t changed between now & August last year pic.twitter.com/nwlVqgXjGM
— CNBC-TV18 (@CNBCTV18Live) February 15, 2022
ALSO READ: 'LIC valuation to be based on feedback, inputs'
Sharma is sticking with the view that there may not be much upside in headline indices now.
It's been my view for the past year or so ( have said this publicly too) that I don't see much upside on the Nifty/ sensex, because of the composition: Financials + Oil Gas + consumers, total around 65-70%. Those are all past best- before dates.Sizzle is in small Caps. Still.
— Shankar Sharma (@1shankarsharma) February 14, 2022
Financial, oil & gas and consumer stocks are among the spaces that carry the maximum weightage in the 50-scrip Nifty benchmark.
| Sector | Nifty50 weightage (%) |
| Financial services | 36.7 |
| IT | 17.5 |
| Oil & gas | 12.6 |
| Consumer goods | 10.4 |
| Auto | 5.4 |
| Metal | 3.3 |
| Pharma | 3.2 |
| Construction | 3.0 |
| Cement | 2.4 |
| Telecom | 2.3 |
| Power | 1.9 |
| Services | 0.7 |
| Fertilisers & perticides | 0.6 |
LIC's 649-page-long DRHP, filed on February 13, sets the stage for the country's biggest public offer of all time. The state-run insurance major will not get any proceeds from the IPO, which is entirely an offer for sale (OFS) by the government, which aims to offload 31.6 crore shares or a five percent stake.
LIC employees and policyholders will get a discount over the floor price under the share sale. (LIC IPO FAQs answered)
A majority of IPOs saw a robust response from investors in 2021. (Check out the best and worst D-Street debutants)
(Edited by : Akanksha Upadhyay)
First Published: Feb 15, 2022 1:21 PM IST
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