Impact of issue price on returns from IPO

Capital market plays a vital role in developing economy for mobilizing savings. Investors with risk appetite are ready to invest their savings in the stock market with the expectation of decent return. Initial public offer (IPO) provides ample opportunities to investors to divert their savings towards stock market. Since shares are offered to the public for the first time different opinions may be raised on the issue price. The main purpose of this study is to find out, the relationship if any between issue price and return and to suggest suitable exit route for the short term investors The research is purely confined to the IPOs made during the financial year 2010-2011. The research highlights the fact that even on the listing day certain companies had generated negative return and for majority of the company´s return on the listing day and subsequent day is far better compared to rest of the periods. Further this research also brings out the fact that there is no significant relationship between issue price and return.