If 2009 was the year of capital erosion, 2010 could well be the year of capital raising! Thanks to the recovering capex cycle and surging domestic expansion activities, the year is all set to witness a frenzy of capital raising activities via IPO, right issues and overseas issues.

The collapse of Lehman Brothers has led to the rechristening of the financial events as `Before Lehman Brothers' and `After Lehman Brothers'. The spiralling events in the last two years have uprooted the conventional wisdom and, in many cases, forced the entities to go back to the basics. Banks have gone back to deposit and lending business, investors have gone back to long-term investments, (re)understanding the risk-reward relationship (high yield = high risk), and in most cases, nations have become `police states'. As developed economies started getting into recessionary trends, overseas investment in emerging markets flew back to its original source. For example, Indian equity market witnessed net sales of $12 bn in 2008. As the demand for investment ideas started drying up, the primary market—IPO market—in India became much quieter. To stretch Schumpeter's idea of `innovator' to `break the cycle'—the government's stimulus package did just that. Globally billions of dollars were pumped into the economies to encourage spending and the investing attitude of public. A cursory look at the Indian IPO market over the last two years shows that economic fundamentals continue to dominate the financial markets. Domestic demand, consumption, savings, and investment are the main currents flowing under the glamorous facade of financial markets.

During 2008 (see Table 1), India Inc. raised Rs 185,526.3 mn ($~4bn) through IPOs. This amount is negligible, compared to almost $30 bn mopped up through IPOs in the US during the same period. Even during the turbulent times, Visa Inc. managed to launch a massive IPO of $17.9 bn. In 2008, a majority of the Indian IPOs were concentrated in the energy sector. The crude oil prices were hitting a new high everyday, so also the commodity prices. Reliance Power managed to make a debut just before global meltdown in January 2008. As the year 2008 progressed, the US continued to record negative GDP growth. The UK government forecast a worst recession in decades, and capital flight from emerging economies gained momentum. Domestically, in the backdrop of falling exports and employment, growth in industrial production (IIP) reached its nadir.

The Analyst Magazine, Indian IPO Market, Lehman Brothers, Financial Markets, Emerging Markets, Indian Equity Markets, Industrial Production, Emerging Economies, FMCG Sector, BRIC Economies, Chinese Economies.