A funny thing is happening in the market for IPOs, or initial public offerings.

Let’s first look at the recent Adani Power IPO. In the age of electronic trading, the IPO was fully subscribed in less than an hour. When it finally closed, it had been oversubscribed by 21.64 times, with investment institutions bidding for nearly 40 times their assigned quotas.

One would have imagined that so many disappointed bidders would buy the shares once they become freely available. But that is not what happened.

When the Adani Power shares listed on the stock exchanges, they had a weak pop to start with but in a matter of hours, it was trading near the issue price. In recent days, it has even dipped below the issue price of Rs. 100 per share. But there are few takers.

The same story was repeated with the National Hydel Power Corporation IPO. First, the blowout response from institutional investors and then the lacklustre listing, eventually leading to the shares being traded below the issue price of Rs. 36.

Many analysts keep showing up on television “explaining” the phenomenon, saying the issues had been “aggressively” priced, leaving “little on the table” for investors. Many draw comparisons with existing power companies using a variety of metrics to conclude that both the Adani and NHPC issues were overpriced, relative to their peers. Such theories place the blame squarely on investment banks that bring the issues to the market.

It seems to me that large institutional investors are saying one thing and doing something else. That is, they keep saying the issues are overpriced but nevertheless put in their bids for vast amounts of the same shares.

Why?

I have to suspect it is in anticipation of listing gains. Or else, there are so many analysts working at so many investment institutions that all that excessive bidding is being done not by those appearing on TV and slamming the same issues but by some others.

The Oil India Limited IPO seems to be following along the same lines. It was fully subscribed on day one (Sept. 7) and will likely close on Sept. 10 with a huge oversubscription. Retail investors tend to place their bids on the last day and will likely claim their quota fully. Many hope the OIL issue will be different in the sense the pricing (in a band of Rs. 950-1,050) will leave enough on the table and provide listing gains.

But that remains a hope, even in a market everybody is calling has turned bullish after the Sensex surmounted 16K yesterday. Who is to blame retail investors, who remain wary of the market.