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Sensex Opens Marginally Higher; Asian Paints Rallies on Strong Q4 Result
Fri, 11 May 09:30 am

Asian shares are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1% while the Hang Seng is up 1.3%. The Shanghai Composite is trading down by 0.1%. Meanwhile, the Dow Jones industrial average rose sharply on Thursday, posting its sixth straight day of gains, following the release of weaker-than-expected US inflation data.

Back home, India share markets opened the day marginally higher. The BSE Sensex is trading up by 69 points while the NSE Nifty is trading up by 20 points. The BSE Mid Cap index and BSE Small Cap index opened the day on a flat note.

Sectoral indices have opened the day on a mixed note with information technology stocks and energy stocks witnessing maximum buying interest. While, automobile stocks and power stocks have opened the day in red. The rupee is trading at 67.38 to the US$.

Bharti Airtel share price plunged 5.3% in the opening trade on the reports that the Department of Telecommunications (DoT) will approve Bharti Airtel's acquisition of Telenor India within a month, and the Vodafone India - Idea Cellular merger by June end, two deals which highlight the rapid consolidation under way in a brutally competitive market.

Asian Paints share price rallied 4.4% after the company reported a 4% YoY rise in consolidated profit at Rs 4.8 billion.

In the news from the FMCG sector. Nestle India Ltd, the local entity of Swiss packaged food maker Nestle SA., on Thursday reported a 38.2% increase in net profit for the quarter ended 31 March 2018, backed by lower cost of raw materials and other expenses.

Net profit for the January-March quarter stood at Rs 4.2 billion as against Rs 3.1 billion reported in the year-ago quarter. Nestle India follows a January-December year for accounting.

Revenue from operations grew by 6.3% during the quarter ended 31 March 2018, backed by volume growth, to Rs 27.6 billion from Rs 25.9 billion in the corresponding year-ago quarter. Its revenue from domestic market grew by 6.3% and exports by 6.2% during the quarter under review.

Nestle India's growth for the quarter is backed by broad volume based growth across categories. This is in line with our strategy of broad based growth through increased penetration.

According to the company, sales during the quarter were adversely impacted due to lower reported sales by the change in structure of indirect taxes and reduction in realisations to pass on the goods and services tax (GST) benefits. On a comparable basis, domestic sales growth is 'estimated' at 13.4%, the company stated.

Nestle India share price surged 4.1% in the opening session.

Moving on to the news from the IPO space. As per an article in a leading financial daily, SIRCA Paints India is coming up with an IPO and has fixed a price band of Rs 151-160 per share for its initial public offering. It is estimated to raise Rs 780 million.

The company's initial public offer (IPO) will open on 16 May and close on 18 May. The shares will be listed on NSE's Emerge platform.

Proceeds of the issue will be utilised to finance the expenditure of plant development; purchase of plant and machinery; and to meeting working capital requirements.

The IPO euphoria has peaked in recent times. It now looks like the smaller companies have also joined the party. The recent SME IPO data for 2017 certainly seems to suggest so.

The amount raised by SME IPOs in 2017 stood at 17.9 billion, more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132.

SME IPO Boom in 2017

With big ticket IPOs in the limelight in 2017, SMEs have also joined in to get a share of the pie. If past history is anything to go by, the IPO wave has generally been followed by a market correction. That too major ones. We've seen stocks debut just before the 2000-01 dotcom bubble. Then the IPO euphoria in 2008 was followed by the sub-prime crisis.

While it doesn't make sense to completely ignore this space, a certain sense of caution is definitely merited.

Meanwhile, the initial public offer of non-banking finance company Indostar Capital Finance was subscribed 69% on the second day of bidding today. The Rs 18.4-billion IPO received bids for 1,55,94,982 shares against the total issue size of 2,25,75,438 shares.

The issue, which is in a price band of Rs 570-572 per share, would close for bidding today.

To know our view on the IPO, you can read our IndoStar Capital Finance IPO note here (requires subscription).

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