Sensex Opens 150 Points Up; Auto & IT Stocks Gain

Thu, 10 May 09:30 am

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Asian shares are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.2% while the Hang Seng is up 0.9%. The Shanghai Composite is trading up by 0.2%. US stocks rose on Wednesday as energy shares jumped on the back of a strong rally in oil prices. The move higher follows President Donald Trump's decision to pull the US out of the Iran nuclear deal.

Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 151 points while the NSE Nifty is trading up by 33 points. The BSE Mid Cap index opened down by 0.1% while BSE Small Cap index opened up by 0.2%.

Barring oil & gas stocks, all sectoral indices have opened the day in green with information technology stocks and automobile stocks witnessing maximum buying interest. The rupee is trading at 67.08 to the US$.

In the news from the economy. As per the International Monetary Fund (IMF), India will be the fastest growing major economy in 2018, with a growth rate of 7.4% that rises to 7.8% in 2019 with medium-term prospects remaining positive.

The IMF's Asia and Pacific Regional Economic Outlook report said that Indian economy was recovering from the effects of demonetisation and the introduction of the Goods and Services Tax and the recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption.

Medium-term consumer price index inflation is forecasted to remain within but closer to the upper bound of the Reserve Bank of India's inflation-targeting bands of 4% with a plus or minus 2% change, the report stated.

However, it added a note of caution that in India, given increased inflation pressure, monetary policy should maintain a tightening bias.

It said the consumer price increase in 2017 was 3.6% and projected it to be 5% in 2018 and 2019.

Further, the current account deficit in fiscal year 2017-18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows.

After India, Bangladesh is projected to be the fastest-growing economy in South Asia with growth rates of 7% for 2018 and 2019; Sri Lanka is projected to grow at 4% in 2018 and 4.5 in 2019, and Nepal 5% in 2018 and 4% in next. (Pakistan, which is grouped with the Middle East, is not covered in the Asia report.)

Overall, the report said that Asia continues to be both the fastest-growing region in the world and the main engine of the world's economy.

The region contributes more than 60% of global growth and three-quarters of this comes from India and China, which is expected to grow 6.6% in 2018 and 6.4% in 2019.

The report said that US President Donald Trump's fiscal stimulus is expected to support Asia's exports and investment. The Asian region's growth rate was expected to be 5.6% for 2018 and 2019.

However, in the medium term the report said that "downside risks dominate" for the region and these include a tightening of global financial conditions, a shift toward protectionist policies, and an increase in geopolitical tensions.

Because of these uncertainties, the IMF urged the countries in the region to follow conservative policies aimed at building buffers and increasing resilience" and push ahead with structural reforms.

In 2017, India was among the three emerging markets, which gained more than 35% in dollar terms. The other two are Hungary and South Korea.

India Outperforms Emerging Market Peers in 2017

So, how will 2018 turn out?

In 2018, the market would be more volatile and under pressure. Investors should brace themselves for the increasing volatility. Although, earnings are likely to recover, profit margins could get squeezed as companies face rising input cost pressures.

Rising oil prices may prompt the government to abandon fiscal prudence at a time when GST collections have been lower than expected.

Moving on to the news from the IPO space. In the latest development, goldman Sachs Group Inc.-backed renewable energy company Renew Power Ltd on Wednesday filed its draft initial public offering (IPO) documents with the regulators.

Renew Power develops, builds, owns and operates utility scale wind and solar energy projects as well as distributed solar energy projects that generate energy for commercial and industrial customers.

The IPO will see the company raise Rs 26 billion in fresh capital, while existing private equity investors of the company will sell an aggregate of 94.37 million shares, according to the draft prospectus.

Renew Power counts Goldmans Sachs, sovereign wealth fund Abu Dhabi Investment Authority, Canadian pension fund Canada Pension Plan Investment Board, Japan's Jera Inc. and Global Environment Fund among its investors. These investors, over several tranches, have invested a total of Rs 67 billion in the company since 2011.

The company plans to use the proceeds of the IPO for redemption of certain debentures issued by it and for funding acquisitions and other strategic initiatives.

ReNew Power was founded in 2011 by Sumant Sinha, a former chief operating officer at wind turbine maker Suzlon Energy Ltd.

Meanwhile, the IPO of non-banking finance company Indostar Capital Finance Ltd was subscribed 41% on the first day of the bidding yesterday.

The Rs 18.4-billion IPO received bids for 91,83,954 shares against the total issue size of 2,25,75,438 shares, data available with the NSE showed.

To know more about the company, you can read our IPO analysis of IndoStar Capital Finance (requires subscription).

Speaking of IPOs, the demand for IPO's had reached sky-high levels last year.

One shall note that, 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, download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the 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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