Sensex Surges Over 1100 Points; SBI and Yes Bank Top Gainers

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Share markets in India are presently trading on a positive note as investors cheered after exit poll results predicted the return of the BJP-led National Democratic Alliance (NDA) to power.

All sectoral indices are trading on a positive note with stocks in the realty sector, capital goods sector and energy sector witnessing maximum buying interest.

The BSE Sensex is trading up by 1110 points (up 2.9%), while the NSE Nifty is trading up by 316 points (up 2.8%). The BSE Mid Cap index is trading up by 3.1% and the BSE Small Cap index is trading up by 3%.

Speaking of Indian share markets, note that the bullishness that we witnessed in the markets from March until mid-April was driven by renewed foreign investor flows into Indian equities.

One of the key reasons this money poured into India, including other emerging markets, was the shift in monetary policy stance by the US Federal Reserve.

Have a look at the chart below which shows how foreign money moved in and out of India over the last three months owing to the evolving global events:

Foreign Investors Turn Sellers in May 2019

Here's what Ankit Shah wrote about it in today's edition of The 5 Minute WrapUp...

• The US central bank, until some months ago, was on track to hike interest rates and shrink the Fed balance sheet. But seeing signs of slowdown in the economy and the nervousness in the stock markets, it showed its willingness to turn dovish.
  
  So, it's unlikely we'll see any interest rate hikes by the US Federal Reserve in 2019.
  
  In fact, my reading suggests that the Fed may resume its easy money policies if the global economic slowdown persists and the markets gets jittery.
  
  One of the key triggers for the ongoing market correction is the escalation in the US-China trade war amid increasing fears of a global slowdown.

Meanwhile, hold on to your safe stocks and don't go looking for overvalued stocks. Maintaining your calm when everyone is losing theirs will help you build long-term wealth.

In the news from the engineering sector, Ircon International share price is in focus today as the company is planning to raise funds by issuing fresh equity shares, piggybacking on the government's proposal to dilute its stake to 75% through follow-on public offer route.

The government currently holds 89.18% stake in the company. As per market regulator's norms, the government is required to bring down the stake to 75%.

The Cabinet has already approved the finance ministry's proposal to reduce government shareholding to 75% in the railway company.

The quantum of stake dilution by the government will be decided based on the number of fresh shares the company issues.

Last week, the government had also said it was planning to divest up to 15% stake in another railway PSU RITES share price through OFS, which could fetch around Rs 7 billion.

Reports state that the government is also aiming to launch initial public offering (IPO) of state-owned RailTel Corp India, Indian Railway Catering and Tourism Corp (IRCTC) and Indian Railway Finance Corp (IRFC) this fiscal.

Speaking of IPOs, we at Equitymaster believe 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.

Moving on to the news from the aviation space, a group of Jet Airways' employees in their mail to SBI Caps said they are in talks with investors to raise US$ 700 million that will be used to revive the cash-strapped airline.

Reportedly, the letter was sent last week and was signed by representatives of Jet Aircraft Maintenance Engineers Welfare Association and Society for Welfare of Indian Pilots. Earlier this month, the employees met SBI Caps officials to discuss the proposal.

While the two sides agreed that the situation at the airline 'is extremely precarious', officials at SBI Caps told employees that their proposal will be considered only after conclusion of the bidding process.

SBI Caps is at present in talks with unsolicited bidders of Jet Airways to bring in equity. They have reached out to Mumbai-based Darwin group and London's AdiGro aviation to bring in additional funds.

On April 29, Jet Airways' employees had written to State Bank of India Chairman Rajnish Kumar, offering to take over the airline. They promised an investment of Rs 70 billion, which includes Rs 30 billion from investors and Rs 40 billion from employees through hypothetical five-year employee stock option programme.

Jet Airways share price is presently trading up by 8.4%.

In other news, as per an article in The Economic Times, the distribution of foreign flying slots of Jet has led to a rift in the aviation sector with IndiGo on one side and its competitors on the other.

Here's an excerpt from the article:

• Air India has the first right of refusal and is getting around half of the Jet Airways' slots on high-demand routes while the remainder of the rights will be given in proportion to a carrier's domestic flights. IndiGo's dominance of the domestic market means it will get the lion's share of the rights after Air India takes half the slots.

The distribution arrangement is guided by the Aeronautical Information Circular or AIC, which gives Air India the first claim on the entitlements.

How this pans out remains to be seen. Stay tuned for more updates.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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Indian Share Market Update: Top Gainers and Losers