Indian Share Markets Opens Flat; PSU & Banking Stocks Gain

Tue, 3 Apr 09:30 am

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Asian stocks are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.70% while the Hang Seng is down 0.64%. The Nikkei 225 is trading down by 0.89%. US stocks closed sharply lower hit by uncertainty surrounding trade policy and weakness in shares of technology and internet companies.

Back home, India share markets opened the day on a flat note. The BSE Sensex is trading higher by 12 points while the NSE Nifty is trading higher by 2 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.1%.

Sectoral indices have opened the day on a mixed note with PSU stocks and bank stocks witnessing buying interest. While, metal stocks and healthcare stocks have opened the day in red. The rupee is trading at 65.04 to the US$.

SBI share price surged 2.4% in the opening trade after the bank increased its base rate (BR) and benchmark prime lending rate (BPLR) by 5 bps with effect from 1 April 2018. While its base rate has been increased from 8.65% to 8.70% per annum, its BPLR has been increased from 13.40% to 13.45% per annum.

In the news from the steel sector. As per an article in a leading financial daily, Tata Steel Ltd. has offered Rs 352 billion in cash, and conversion of the remaining debt of about Rs 270 billion into equity, to take over Bhushan Steel Ltd.

Reportedly, creditors will get 12.3% equity in Bhushan Steel. As of 1 February this year Bhushan Steel had a total debt of Rs 571.6 billion.

The company has a financial debt of Rs 560.5 billion and operational debt of Rs 10.5 billion. Further, Bhushan Steel has a liquidation value of Rs 145.4 billion.

Tata has also offered Rs 12 billion to its operational creditors depending on the criticality to run the company.

Speaking of indebted companies, we had a look at the debt to equity (D/E) ratio of the 30 companies that form part of the BSE Sensex.

We have not considered the 7 banks and 1 financial institution (HDFC) for this exercise. Of the remaining 22 Sensex companies, these are the ones with D/E ratio more than 1 in FY17.

In such an environment, it makes sense for investors to be selective while buying stocks. Focus on value and the underlying fundamentals of the business. Then, they need not worry about the market.

So, what is key to identifying potential multibagger stocks? How does one pick them at the right time and ride them to their full potential? How many multibaggers do you really need to achieve the big riches that you desire?

Most importantly, are there any stocks right now that could turn out to be multibaggers? Click here to know everything that you need to know right now about mutlibagger stocks...

Tata Steel share price opened the day down by 0.6%.

Moving on to the news from the IPO space. Four state-owned firms, including Mazagon Dock Shipbuilders and Rail Vikas Nigam Ltd (RVNL), have filed draft papers with markets regulator to float initial public offerings (IPOs).

Railway infrastructure firm Ircon International and warship maker Garden Reach Shipbuilders and Engineers are the other two firms which have filed IPO papers. The IPOs will be part of the government's target to garner Rs 800 billion through stake sales in state-owned companies in 2018-19.

Mazagon Dock and RVNL had filed their draft red herring prospectus (DRHP) on 28 March while Ircon International and Garden Reach approached the regulator on 26 March.

Moreover, three state-owned firms-Mishra Dhatu Nigam Ltd, Hindustan Aeronautics and Bharat Dynamics-came out with their respective initial share-sales last month.

Besides, RITES and Indian Renewable Energy Development Agency Ltd (IREDA) had already approached with preliminary papers. The public issue of Mazagon, a lead shipyard of India serving the nation's strategic requirements, will see sale of over 22.4 million equity shares by the government.

The IPO of RVNL, which builds infrastructure for high speed rail, will see sale of 208.5 million equity shares or 10% stake by the government. Government plans to sell 9.9 million Ircon shares, or a 10.53% stake in Ircon International, through the public float.

Besides, the government will divest over 20 million shares of Garden Reach Shipbuilders and Engineers. The equity shares of these companies are proposed to be listed on BSE and NSE.

Speaking of IPOs, the demand for IPO's has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon Technologies, among others.

This euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the ongoing IPO rush.

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

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