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Sensex Opens Firm; Axis Bank & Bharti Airtel Top Gainers
Thu, 29 Jun 09:30 am

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.54% while the Hang Seng is up 0.82%. The Shanghai Composite is trading higher by 0.23%. The US stocks edged higher on Wednesday led by a rally in financial and technology stocks.

Meanwhile, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 149 points while the NSE Nifty is trading higher by 46 points. The BSE Mid Cap Index and BSE Small Cap index opened the day up by 0.7% & 0.6% respectively.

All sectoral indices have opened the day in green with realty stocks and metal stocks leading the gains. The rupee is trading at 64.53 to the US$.

Bharti Airtel share price opened over 2.5% up on the reports that the telecom major is the most likely acquirer of the struggling Tata Teleservices as the Indian telecom sector consolidates into a four-operator market in the next three years.

Reportedly, with the big merger-in-progress between Vodafone and Idea Cellular, Bharti Airtel, a strong peer is starting its talks of acquiring Tata Teleservices. If the Vodafone and Idea merger actually gets implemented, it will outpace Airtel's revenue and lead to its loss of market capitalisation. To mitigate this, Airtel's chief Sunil Mittal devised a new strategy to maintain its leadership in the market.

Airline stocks opened the day in green with Spicejet Ltd & Interglobe Aviation witnessing maximum buying interest. In the latest development, the Cabinet on Wednesday gave in-principle approval for "disinvestment" of debt-laden Air India, making its intent to sell the debt-laden airline rather clear for the first time.

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A nagging drain on the exchequer for long, the national carrier has a total debt of around Rs 500 billion and an annual interest outgo Rs 45 billion. It is surviving on a 2012 bailout package, under which it has so far received Rs 240 billion.

Reportedly, the move will not only embellish the credentials of the National Democratic Alliance (NDA) as a reformist administration, but also ease the fiscal pressure on the union government - especially in indirectly servicing the airline's outstanding debt burden.

The group under Jaitley will decide on the treatment of unsustainable debt of Air India, hiving off certain assets to a shell company, spinning off and selling stakes in three profit-making subsidiaries, the quantum of disinvestment, and the eligibility criteria for the bidders.

Speaking of the aviation industry, India's aviation industry is on a high-growth trajectory. According to International Air Transport Association (IATA), India has moved up two places to become the fourth largest aviation market in terms of number of passengers.

Indian Aviation Spreading its Wings

Notably, domestic air passenger traffic surged nearly 17.4% YoY to 10.2 million in May 2017. In May 2016, this figure was 8.7 million.

Interestingly, Air India also improved its market share marginally in May 2017. The carrier's share rose to 13% from 12.9% in April, though still below 14% that it had in January.

Although greater air travel is becoming a new normal, investors need to understand the industry dynamics before buying up aviation stocks.

In another development, Eris Lifesciences is set to debut on the stock market today after concluding its initial public offer (IPO) last week.

The company's IPO was subscribed 3.29 times during 16-20 June. The portion set aside for qualified institutional buyers (QIBs) was oversubscribed 4.68 times, non-institutional investors 45% and retail investors 3.51 times.

The price band for the share sale was fixed at Rs 600- 603. Eris Lifesciences is into manufacturing of branded pharmaceutical products in select therapeutic areas.

The company is one of the fastest growing players in the acute and chronic segment and has a product profile of 80 mother brands. Even as other export focused pharma companies have been facing the regulatory heat in developed markets, this company due to its 100% domestic exposure is relatively well placed.

Recently, one of the issues of The 5 Minute Premium laid out all the financial details of Eris Lifesciences, our view on whether to apply and the risks to the IPO. Do take a look, if you haven't already.

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.

We have reviewed each of them and have released their recommendation notes. You can check the same on our IPO page.

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

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Aug 23, 2017 10:44 AM

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