Corporate Ownership & Control / Volume 15, Issue 4, Summer 2018 64 INVESTOR SENTIMENT AND IPO PRICING: MARKET: EVIDENCE FROM INDIA Manas Mayur * * Department of Finance & Accounting – Goa Institute of Management, Sanquelim Campus, India. Contact details: Sanquelim Campus, Poriem Sattari, Goa – 403505, India. 1. INTRODUCTION An Initial Public Offerings (IPO) is the first sale of a company’s shares to the public and the listing of the shares on a stock exchange. It is one of the ways of raising cash. Cash is a soul of a company, especially in today’s competitive environment where companies need to grow to survive, is an enabler for a company’s success. Companies need cash to carry out activities to sustain and beat the competition. Activities like growing of market share, growing of customer base, increase in R&D spending in order to find new products or new uses for existing products, an increase of manufacturing capacity, marketing and distribution etc. have forced companies to constantly search for cash. The recent trend shows that IPO has become one of the popular and dependable methods of raising cash. But the trend was found to be very inconsistent. The volatility was also found in terms of return generated by the IPO stocks. The volatility in volume and returns can affect the confidence of investors. Hence a study on the variability in the volume of IPOs across years and variability in initial return generated by the investors was needed. The inconsistency in volume is studied from the perspective of market timing attempt by the issuers. Years, where the volume of IPOs was very high, were termed as ‘Hot market’ period whereas years, where the volume was low, were termed as ‘Cold market’ period. Market timing has attracted many researchers ever since Ritter (1984) documented the concept of “Hot market” and “Cold market” for the sample of US firms. According to Ritter (1984), the hot market is that phase of the market which is perceived to be favourable by issuers and entrepreneurs, whereas the cold market is that phase of the market which is perceived to be unfavourable. The overall research question of the present study is whether Indian firms timed their issue with a favourable market condition or not? There is a dearth of empirical studies conducted to examine the market timing approach. Even in the already sparse empirical literature, most existing studies are in the context of developed countries, and evidence in the context of emerging countries is rare and far in between. Authors have not come across any research study done in the context of Indian firms on the theme of this paper. The present study adds to the existing sparse empirical literature by investigating the above issues in the context of a sample of firms drawn from the emerging market of India. Finally, the India specific focus of this study makes it especially useful for the ever increasing pool of investors interested in the Indian Primary market. Growing interest of investors in the Indian primary market is evidenced by the recent buoyancy in the IPO activity of the Indian companies (Table 1). While the success of the Indian primary market in the recent years is a positive signal, efforts need to be done to sustain the positive trends in the future also. Abstract How to cite this paper: Mayur, M. (2018). Investor sentiment and IPO pricing: Market: Evidence from India. Corporate Ownership & Control, 15(4), 64-72. http://doi.org/10.22495/cocv15i4art6 Copyright © 2018 The Authors This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0). http://creativecommons.org/licenses/by- nc/4.0/ ISSN Online: 1810-3057 ISSN Print: 1727-9232 Received: 17.04.2018 Accepted: 04.07.2018 JEL Classification: G00, G10, G20, G30, G32 DOI: 10.22495/cocv15i4art6 The present paper aims at understanding the variability in IPO volume and initial return in Indian capital market. In order to see whether the IPOs were timed with the favourable market or not the market was divided into the hot and cold market, defined on the basis of the monthly IPO volume. Then the relationship between market type and total proceeds was established with the help of a multivariate regression model with the idea that any timing attempt should be reflected in the activity of issuance of equity. The result based on multivariate regression suggest that Market timers, identified as firms that go public when the market is hot, tried to maximize the total proceeds at the time of IPO. The hot-market effect is remarkably robust; it is significant for both firm and industry-level characteristics. Keywords: Initial Public Offerings, Emerging Market, India, Market Timing.