Sensex Ends Day in Green; Consumer Durables Stocks Top Gainers

Mon, 9 Apr Closing

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After opening the day in green, share markets in India  witnessed positive trading activity throughout the day and ended the day deep in green. Sectoral indices too ended the day in green, with stocks in the energy sector and stocks in the consumer durables sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 162 points (up 0.5%) and the NSE Nifty closed up by 48 points (up 0.5%). The BSE Mid Cap index ended the day up 0.2%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets too finished in green. As of the most recent closing prices, the Hang Seng was up by 1.2% and the Shanghai Composite was up by 0.2%. The Nikkei 225 was up by 0.5%. Meanwhile, European markets were trading on a mixed note. The FTSE 100 was down by 0.1%, The DAX, was up by 0.6% while the CAC 40 was up by 0.2%.

The rupee was trading at Rs 65.17 against the US$ in the afternoon session. Oil prices were trading at US$ 62.36 at the time of writing.

the news from the IPO space, Lemon Tree Hotels Ltd made a decent debut on bourses today. The scrip of the company, which recently concluded its IPO subscription offer, got listed at Rs 61.6, a 10% premium to its issue price of Rs 56.

Lemon Tree Hotels Ltd is the India's largest hotel chain in the mid-priced hotel sector, and the third largest overall, on the basis of controlling interest in owned and leased rooms, as of June 30, 2017 (as per the Horwath Report).

It is also the ninth largest hotel chain in India in terms of owned, leased and managed rooms, as of June 30, 2017. The company operates in the mid-priced hotel sector, consisting of the upper-midscale, midscale and economy hotel segments.

A significant part of the company's revenues (57% in FY17) comes from the corporate customers. The company opened its first hotel in 2004 and the count as of 31 July 2017 stood at 40.

To know more about the company, you can read our IPO analysis of Lemon Tree Hotels Ltd (requires subscription).

Lemon Tree Hotels Ltd share price ended the day up 28% from its issue price.

IPOs Underperform Broad Market Indices

2017 will undoubtedly be considered as the year of IPOs. The IPO activity is headed for a record. They have garnered more than Rs 650 billion, surpassing the previous record of Rs 375 billion in 2010. This year, the demand has exceeded expectations.

What if one had invested in all the IPOs? How have the IPOs performed in 2017? And, have they outperformed the indices?

According to an article in Business Standard, an investor who bet on the 33 IPOs of 2017 (on a weighted average basis) has seen the value of investment rise by 17%. However, compared to broad market indices, the underperformance is a bitter disappointment.

Below chart clearly shows the underperformance of IPOs.

Interestingly, if you take the Avenue Supermarts (D-mart) and HDFC Life out of the equation from the IPOs above, the gains drop to a meager 6%. Compared to this, the Sensex has gained 27%, while the small-cap index surged more than 50%.

What is the reason for this underperformance?

One of the key reasons IPOs have touched the altitude is due to a surge in the Indian equity market backed by liquidity and increasing investor demand for financial assets. Private equity investors and promoters took advantage of the absurd demand and came out with sky-rocket valuations. This is what we call a valuation bubble in the IPO market.

In our previous edition, we categorically stated:

• "With greed hypnotising most folks, it is time for retail investors to exercise caution. While this does not mean that you should avoid IPOs lock, stock, and barrel; just ensure you do not end up paying higher valuations for a company that is yet to establish its worth".

During such times, it is imperative to be critically selective when investing in IPOs. Carefully analyse each company for its own merits and don't give in to the hype surrounding the public offering.

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 stocks in the banking space. was in focus today after a leading financial daily reported that the mortgage lender was in talks to acquire Apollo Munich Health Insurance Co.

The reports stated the HDFC could acquire Apollo Munich for an approximate valuation of Rs 10 billion.

Further, the reports added that HDFC is close to acquiring Munich Re's health insurance venture in India with Apollo. Since Ergo has a partnership with HDFC in the general insurance space, it was easier for the two to strike the deal.

HDFC Ergo General Insurance is a joint venture between HDFC and Ergo International AG, part of Germany's Munich Re group, a leading reinsurer in Europe.

HDFC has a 51% stake and Ergo holds 49% in the venture.

HDFC share price, ended the day up by 0.5%.

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

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Indian Share Market Update: Top Gainers and Losers