Indian Indices Trade Marginally Lower; Oil & Gas Stocks Witness Selling

Wed, 21 Jun 11:30 am

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Share markets in India are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the energy sector and IT sector witnessing maximum selling pressure. Realty stocks are trading in the green.

The BSE Sensex is trading down 78 points (down 0.3%) and the NSE Nifty is trading down by 35 points (down 0.4%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.3%. The rupee is trading at 64.60 to the US$.

In the news from IPO markets, the initial public offer of leading securities depository Central Depository Services (CDSL) got oversubscribed 7.5 times on the second day of the bidding process yesterday. This came as the IPO is getting robust response from retail investors.

The category reserved for qualified institutional buyers (QIBs) was oversubscribed 6.54 times, while the same reserved for non-institutional investors and retail investors were subscribed 3.36 and 10.32 times, respectively.

The price band for the share sale has been fixed at Rs 145-149 and the issue will close on June 21. The company is expected to raise Rs 5.1 billion at the lower end of price band and Rs 5.2 billion at higher end of price band.

To know our view on the CDSL IPO, you can visit our IPO page.

Apart from CDSL, market participants are tracking the IPO of GTPL Hathway which is accepting bids from today.

The company has set a price band of Rs 167-170 per share for the IPO. The offer will see the firm raise Rs 2.4 billion through a fresh issue of shares and a secondary share sale of 14.4 million shares by the promoter group.

We will shortly release a note today on the above IPO. Stay tuned...

Speaking of IPOs, primary markets have caught the frenzy of investors. Looking at the performance of IPOs listed in 2017, one could see the reason why. Almost 75% of the IPOs listed in 2017 till date have given positive returns. Although we are nowhere near the euphoria of 2007, we are slowly but surely getting there.

However, according to Hindu Business Line, till June 2016, only 40% of the IPOs launched between 2004 and 2011 were trading above their issue price, as can be seen from the chart below.

Are IPOs a Sure Shot Way to Make Money?

We, at Equitymaster, have always recommended IPOs cautiously. Here's Rahul Shah, co-head of research at Equitymaster, explaining our rationale behind the approach:

• 'We know what a dirty game the IPO business is. We've seen it over and over again: It's a game where the odds are stacked against investors. So for us, the equation is simple. We'd rather face criticism in the short run than see our subscribers lose money over the longer term. We weren't afraid to do this during the hot IPO days of 2007, and we're not afraid to do it today.'

The Bottomline: You need to evaluate each IPO on its merits by considering its fundamentals, and most importantly, the valuations. And this is particularly important when the hype surrounding IPOs is at its peak.

If you're new to the 'lovely' world of IPOs, we have something for you...

Our new and completely free report - How to Get Rich with IPOs - will tell you how to find those money spinning IPOs and avoid the disasters in the coming year and beyond.

In the news from global financial markets, Chicago Federal Reserve President Charles Evans said it may be worthwhile for the US central bank to wait until year-end to decide whether to raise rates again. This, as per Charles Evans, is because of the recent softening in inflation data.

Earlier, this month, the US Federal Reserve raised its interest rates for the second time in three months by 25 basis points to 1.25%.

The central bank also said it would begin cutting its holdings of bonds and other securities this year.

Most Fed policymakers now think that the central bank should take steps to trim its balance sheet later this year as long as the economic data holds up. However, trimming the balance sheet would tighten financial conditions.

Normalising the balance sheet could also impact emerging markets.

Only time will tell how this all pan out. Meanwhile, we'll keep you posted on the latest developments.

For domestic markets, the Fed's decision may bring some concerns in the short run. However, a crash can be an ideal time to bet on solid Indian companies that are well-shielded from adverse developments in global markets, as these companies can turn into bargain buying opportunities.

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

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