Global events deeply influence our money matters here in India. When major overseas markets struggle, India’s economy feels the effects too. Many Indian companies have delayed plans to list initial public offerings (IPOs) amid market uncertainty. Let’s look at how worldwide trends can slow or accelerate new IPO listing and businesses raising funds through public markets. We can make informed decisions by understanding these connections between world happenings and IPOs.
Notable Global Economic Trends
Scratching the surface alone can hardly lead to diamonds and pearls. One has to dig deep! It is essential to state that global economic headwinds impact stock markets worldwide. Instead of superficially focusing on the New York Stock Exchange or the London Stock Exchange, we will attempt to understand the underlying trends that impact global stock markets. Here are the top global trends that have an impact not limited to their locale.
1. Russia-Ukraine War
The world was still recovering from COVID-19 when Russia attacked Ukraine in February 2022. This unexpected war put pressure on India. Many Western nations wanted India to cut economic ties with Russia. But India managed to still get the energy supplies it needs from Russia, even with the Western pressure. This show of strong policymaking gave the Indian stock market a boost. It increased faith that India’s government can keep things stable even during global conflicts.
2. Hawkish Interest Rate Policy Regime by the Federal Bank in the United States
Gone are the days when Federal Bank of America sneezes, and the rest of the world catches a cold. Far from it! The U.S. dollar continues to remain the most potent currency in the world. Getting to the point, what matters the most is not the strength of the U.S. dollar but the relative strength of a particular currency, viz. a.viz. The U.S. dollar.
Amid unprecedented uncertainties created in the global economic landscape, the U.S. Fed has maintained its hawkish stance since March 2022, but the Indian rupee has retained its relative strength considerably. This fact has wooed domestic and foreign institutional investors to invest in the Indian stock market.
3. Slowing Chinese Economy
The Chinese dragon has been experiencing a slowdown for quite some time now. The fractures in its economy started hurting even before the pandemic began. The infrastructure crisis of 2019 was just the tip of the iceberg. Although the Chinese economy is unlikely to fall, the overreliance of top global businesses on China-led supply chains has been experiencing a reversal in recent times.
Top businesses prefer middle-income countries such as Vietnam, India, and Bangladesh for parking their investments. Indian investors are certainly not deaf. These developments have been grooving music to their ears.
4. Israel – Hams War (& Related Gulf Crisis)
In October 2023, Hamas military actions worsened energy stability worldwide. This brought deep rivalries between major powers out into the open. With growing tensions globally, investors are looking to India as a safe place to put their money. India seems stable compared to other options now.
By understanding what’s happening globally, we can see why these world events bring more foreign investment into Indian IPOs. When things look rocky out there, India gains some advantage.
Influence on IPO Listings
Let us use authentic reports published by a trusted global consulting agency to easily understand the impact of the significant global cues on IPO listing.
EY Global IPO Trends Report – Q3 (2023)
The EY Global IPO Trends Report 2023 highlights a considerable decline in both volume and value of global IPO listings in the first three quarters of 2023 (5% and 32%, respectively). The report, however, highlights an improvement in sentiments in major Western countries, particularly the United States, but a cooling IPO market in China.
The same report highlights that in 2023, emerging markets accounted for 77% of the global IPO listings in volume and 75% in value. The same report highlights that investors have embraced new entrants such as Indonesia, Malaysia, and India as thriving destinations for their IPO investments.
Proposition
While not explicitly mentioned, this report’s findings go well with the theory of rising investor interest in emerging market economies such as India. 2023 was the time when the world started experiencing the actual impact of Russia’s invasion of Ukraine on day-to-day business activities. By then, investors were clear about investing in safe locations such as India and Malaysia. Turbulence in the global superpower landscape translated into investment opportunities in India. This indeed placed India in a sweet spot for IPO listings.
EY Global IPO Trends Report – H1 (2024)
According to the EY Global IPO trends report for Q2 – 2024, the number of listings has declined by 12%, and the value of the sum raised through IPOs has dropped yearly (YoY). While IPO activity has declined in the Asia Pacific region, India (among others) is a notable exception. The same report highlights that India experienced a surge in IPOs during this period. It accounted for 27% of the global IPO pie regarding deal volume.
Proposition—Although not explicitly mentioned in the report, the “peace haven” theory works. Investors prefer promising (yet peaceful) countries like India as their investment bet. They undoubtedly analyse myriad factors before investing, but the ability of the regime to maintain peace amid rising global challenges weighs heavily in their minds.
A regime synonymous with strength infuses more confidence in investors’ minds. They get the much-required stability in policy, a priori, for getting good returns on investments.
Conclusion
In this article, we have seen how global markets and the underlying global currents considerably impact the markets of emerging countries such as India. With the help of authentic reports, we’ve seen how India has become the centre of IPO investments.
Our most important finding has been that global financial agencies such as the IMF expect India to continue its strong economic performance. The cues align so top companies can be listed on the Indian stock exchanges.
