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The Indian stock market experienced a remarkable surge on Thursday, culminating in record highs for both the Sensex and Nifty indices. This unexpected surge was attributed to the successful launch of the Bajaj Housing Finance IPO, along with two other IPOs that closed for subscription on Wednesday. The market initially struggled to break through the 25,000 mark, but after 2 PM, a swift upward movement took hold.
Bajaj Housing Finance's IPO received an overwhelming response from investors, attracting bids worth a staggering ₹3.24 lakh crore for an offering aiming to raise ₹6,560 crore. The other two IPOs, Kross and Tollins Tyres, also witnessed significant investor interest. In total, nearly ₹4 lakh crore of investor wealth was temporarily blocked during the subscription period due to the ASBA mechanism.
The ASBA mechanism, a system designed to facilitate IPO applications, ensures that the funds allocated for an IPO are blocked in the applicant's bank account until the allotment process is completed. If the applicant is allotted shares, the funds are debited from their account; otherwise, the blocked funds are immediately released. This release of capital, potentially amounting to a substantial sum, is believed to have played a significant role in fueling the surge in the stock market.
The upward momentum was particularly pronounced in large-cap stocks. Key contributors to the Nifty's gains included Reliance Industries, HDFC Bank, Bharti Airtel, Infosys, and SBI. All 50 index constituents ended the day in the green. The weekly expiry of Nifty 50 contracts also contributed to the recovery. As the Nifty crossed 25,200, call writers rushed to cover their positions, leading to a short squeeze that further amplified the upward movement.
Source: How did the Bajaj Housing Finance IPO take Sensex, Nifty to a record high?