NO QUICK ROUTE TO ‘HAPPIEST’ LIFE

The Rs.702-crore Happiest Minds Technologies IPO opened today; it’s the first day and priced at Rs.165-166/share, the issue is already fully subscribed, 1.6 times till now and we are only at half a day yet. The issue closes only on the 9th of Sept.

More than the issue getting this kind of response, what is really newsworthy is that the issue has seen a huge retail participation. The retail portion of the IPO has already seen subscription of 8.4 times.  Yes, like always HNIs are there is full force too, seeing 31.6% while institutional is at 8%.

HNIs and institutional is routine but seeing the retail investors come in such a huge force is interesting. Its not only about the issue, which has captured the imagination of many but the perception is that the IPO will most certainly create many happy pockets!

This is again a reflection of the how the pandemic has fueled a huge ecosystem of new generation or millennial investors. These are young investors and working from home, using technology to the best, they are investing and trading big time in the stock market. Right bang in the middle of the pandemic, when the lockdown was complete, these millennials used the time, opportunity and surplus funds to open accounts – this period saw a whopping 70% jump in account opening of which 80% were by millennials, all first timers. And not just directly, even the mutual funds reported a huge jump in SIP accounts, once again by millennials.

This run-to-the-market was a contrary behaviour – retail participation of this magnitude happens when a bull market is at its peak but there, the markets had tanked over 40% and the young ones were rushing in – directly and through SIPs. With so much information now available at their disposal, technology at the tip of their hands, easy-to-use mobile apps, zero brokerage and with so many “wizards” giving gyaan, they all were convinced that looking ahead, they were bound to make profits.  

These reasons apart, with interest rates dipping on fixed income and FDs, realty and gold not being an option at all, stocks have emerged as the best tools for the new generation of retail investors.

Retail investor interest is more seen in small and mid-cap stocks, as they are all on the lookout for the next “Infosys in the making.” They have read and heard stories of how people invested in stocks at cheap prices and are now millionaires or stories of how some have sold only one stock and bought a car or conducted a marriage in the house. Maybe that explains this mad rush for the Happiest Mind IPO.

And therein lay the danger – they are all looking for quick fixes, wanting to get rich quickly. That, in this market will not happen as the jump up from here will be very gradual and slow. Yes, this set of millennial investors are much better read but the underlying fact remains that the herd mentality is the main driving force. Many retail investors do not truly understand the fundamentals of the economy and company, technical trading is not even on their learning curve. Yet, they are rushing in like equities alone can relieve them of all their financial woes.

The danger here is crystal clear – reckless trading, following someone blindly while not applying one’s own mind and not understanding the logic behind an investment can lead to their capital itself being wiped out. Currently, even for seasoned veterans, the present market, where there is no correlation between the fundamentals and liquidity, makes no sense. And yet, we have this huge set of retail investors, rushing in – fools rush in where angels fear to tread.

Best to be cautious. Reading Munger and Buffett cannot make you one of them. Best policy ever – do not put your money in something whose business model you don’t understand. Study, study, study – unless you yourself are not convinced, do not invest. The individual investor should act consistently as an investor and not as a speculator.

Best word of advice – investment should be like watching grass grow or watching paint dry. If you want to grow rich quick want excitement, go to a casino!