Sensex Ends Above 35,000 Mark; Bank & IT Stocks Outperform

Wed, 17 Jan Closing

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After opening the day flat, share markets in India witnessed positive trading activity throughout the day and ended the day on a strong note. Gains were seen across all sectors with stocks in the banking sector and stocks in the IT sector, leading the gains.

At the closing bell, the BSE Sensex stood higher by 311 points (up 0.9%) and the NSE Nifty closed up by 95 points (up 0.9%). The BSE Mid Cap index ended the day up by 0.7%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.3% and the Shanghai Composite was up by 0.2%. The Nikkei 225 was down by 0.4%. Meanwhile, European markets were trading on a negative note. The FTSE 100 was down by 0.3%. The DAX too, was down by 0.2% while the CAC 40 was down by 0.2%.

The rupee was trading at Rs 63.9 against the US$ in the afternoon session. Oil prices were trading at US$ 63.6 at the time of writing.

In news from the IPO space.

In news from stocks in the IPO space. The Rs 6 billion initial public offer of Amber Enterprises India, opened on the bourses today. The IPO was subscribed by over 11% on the first day of the offer. The IPO opened today, and will close on 19 January. The company has set a price band of Rs 855-859 per share.

Amber Enterprises India Ltd, a manufacturer of air conditioners, on Tuesday raised around Rs 1,787.1 million by selling shares to institutional investors as part of its anchor book allocation, a day before its initial public offering (IPO) opened.

The company plans to use the net proceeds of the fresh issue for repayment of debt.

Meanwhile, IPO of IT firm Newgen Software Technologies, was subscribed 40% on the second day of its listing.

The IPO which aims to raise over Rs 4.3 billion, will close on 18 January.

The company has set a price band of Rs 240-245 per share.

So, are these companies leaving enough money on the table for investors? We've released our IPO notes for the above IPOs. We have released our IPO note on both the IPOs. You can access the same in our IPO section.

company. You can access it here (subscription required).

Poor IPO Returns Post Listing

If you've been tracking the demand for IPOs, you would certainly think that 2017 was the year of IPOs. For one, IPO subscriptions were at sky high levels. But if the performance of recently listed IPOs are anything to go by, they have flattered to deceive.

Of the five recent high-profile IPOs which listed on the stock market, four have given negative returns soon after listing.

The IPO activity in FY17 is mainly driven by Offer for Sale (OFS) rather than fresh issues. An OFS is a route through which existing promoters and private equity investors offload their stake. Here, the money from the sale goes to the selling shareholder. Whereas, in a fresh issue, the money raised goes to the company who, normally, utilizes this money to repay debt, for capital expenditure, etc.

Also, the number of Private Equity (PE) investors exiting these companies raised a red flag. These PE investors had bought a stake in the IPO recently at a fraction of the listed price. Sensing the frenzy, they were able to offload their stake with multifold returns.

The only person left high-and-dry here was the retail investor. And, this is not a recent occurrence. The IPO euphoria is something similar to what was seen in 2007-08. More than 70% of the IPOs listed in 2007 and 2008 were in the red, even today when the Sensex is at an all-time high.

But it doesn't make sense to completely ignore this space. The IPO space has also given us names like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have created immense wealth for shareholders.

For the retail investor, it is very important to ignore the noise and focus on the fundamental and valuations on the table. And more often than not, this approach works much better than following the herd.

That's Ankit Shah's approach at Equitymaster Insider. He keeps an eagle-eye on the developments in the IPO space and updates his readers on the big-ticket IPOs.

Ankit and his team of researchers constantly reference this handbook on investing in IPOs. You can download a copy for yourself. It is free. Just click here.

Moving on to news from the PSU sector. BHEL share price ended the day on an encouraging note, after the state-run power equipment maker bagged an order worth Rs 28 billion.

BHEL said that it won a Rs 28 billion worth contract from Maharashtra State Power Generation Company (Mahagenco) for a 660 MW supercritical coal based thermal power project in Maharashtra.

The project will be set up as an expansion project (Unit 6) of Mahagenco's Bhusawal Thermal Power Station in Jalgaon district of Maharashtra,

BHEL's scope of work for this brownfield expansion project includes design, engineering, manufacture, supply, construction, erection, testing and commissioning of 660 MW supercritical coal-based thermal set and civil works.

The key equipment for the contract will be manufactured at BHEL's Trichy, Haridwar, Bhopal, Ranipet, Hyderabad, Jhansi, Thirumayam and Bengaluru plants while the company's Power Sector - Western Region shall be responsible for civil works and erection and commissioning of the equipment.

BHEL said it has a longstanding partnership with MAHAGENCO and has a significant share of 81% in the coal-based power stations installed in the state by the utility.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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