The gloomy market conditions in this year have made most investors cautious. The trend has seemingly been downward in major sectors like oil, pharma, and technology. The good news is, in this current market, investor trust towards small and medium-sized businesses has ballooned. This year has seen major players struggle, but small and medium enterprises or SMEs have seen a rapid rise in investment and market performance.
This boost to SME investment has seen 133 companies raise over INR 22 Billion in 2018 through IPOs or initial public offerings. A further boost to investors is that the number of companies has remained the same as the previous year. The rise of SMEs are an opportunity for you, the investor to invest small and buy out big through these IPOs, this, however, does run a risk.
The stability of SMEs can be much more of a risk than established players in any sector. This means you could be investing in the next Apple, but you could also run the risk of losing your investment entirely. This is why it is recommended that you invest in SMEs through the backing of QIBs or qualified institutional buyers while also recognising that your investment runs a risk.
2018 has seen the Bombay stock exchange or the BSE and the National stock exchange or the NSE bolstering trade of small and medium business IPOs by 30%, this rise in investor trust is great news for those of you looking to start or expand your investment portfolio. The trends suggest that the record rise of IPOs for SMEs will continue to surge to highs that haven’t been seen in the market since 2012.
The increase in customer appetite among high net-worth investors for a winning stock in the lesser known names has seen an increase in startup investment. This increase in the willingness of the customer to take a risk works in favor of you as a new investor as well, this trend of investment has boosted more SMEs to offer their IPOs on the open market. In August 2018, the initial IPOs that hit the market were only 5, after investor sentiment started looking positive, a further 30 IPOs hit the open market in September 2018. This means you can both diversify your portfolio as an investor while having the ability to shop around various sectors of the market.
Most SME investments have sporadic growth patterns, this indicates a patient investment approach, while the rarest of IPOs hit the ground running and this year has seen a record-breaking run. It is recommended that you invest with a long-term buyout in mind while investing in the smaller IPOs at low rate purchases, remember that selling quickly and at a 10% increase will hinder your profit opportunities. Look for IPOs with at least 20-25% growth potential before selling the stocks. If current market trends continue, you can expect a further rise in SMEs throughout the spectrum of the market in every sector.