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Dull End to the Week; IDFC Bank Gains on Merger News
Fri, 7 Jul Closing

Indian share markets continued to trade rangebound in the afternoon session amid weak global markets. At the closing bell, the BSE Sensex stood lower by 9 points, while the NSE Nifty finished down by 9 points. Meanwhile, the S&P BSE Mid Cap finished flat & the S&P BSE Small Cap finished up by 0.3%. Gains were largely seen in realty stocks, pharma stocks, and energy stocks. While, software stocks and automobile stocks finished in red.

Bharat Forge share price rose 0.8% after the company's subsidiary signed pact with Israel's Aerospace Industries to build new maintenance center in India for selected advanced air defence systems. The two companies have also agreed on expanding their joint operations for development, manufacturing and marketing of precise ammunition systems.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.17%, while the Hang Seng & the Nikkei 225 fell 0.49% and 0.32% respectively. European markets are lower today with shares in France off the most. The CAC 40 is down 0.35% while Germany's DAX is off 0.22% and London's FTSE 100 is lower by 0.18%.

The rupee was trading at Rs 64.73 against the US$ in the afternoon session. Oil prices were trading at US$ 44.38 at the time of writing.

In news from IPO space, amidst a strong initial public offer (IPO) pipeline along with a favourable capital markets environment, the IPO financing market is expected to remain buoyant during the current financial year 2017-18.

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According to the credit rating agency, ICRA's latest report, the present, average size of the IPO financing market which is around Rs 175 billion to Rs 225 billion per issuance, could rise to Rs 650 to 700 billion for issuances which are a large as well as with higher investor interest.

The credit rating agency further said that in the previous financial year, the IPO financing market remained vibrant on surge in high net worth individual (HNI) interest in IPOs to take benefit on the listing gains. The median subscription level for the non-institutional investor, which include HNI investors, category stood at 80 times for the IPOs in FY17, as against 2 times for FY16.

The report also noted that the field is dominated by non-banking financial company (NBFC) arms of some of the leading players in the capital markets and wealth management businesses. Its analysis of the issuances during the period from April 2016 to June 2017 shows that out of the total of 31 issuances, 24 issuances were listed at a premium, with median listing gains of 14%.

IPO Frenzy Continues

As per The Economic Times, at least fifty more companies are likely to come out with IPOs this year, raising between Rs 400 and Rs 600 billion. To put that in perspective, in 2007-08, 84 companies raised Rs 410 billion via IPOs.

The markets were buoyant then too, trading at an average PE of 21 times. Today, the Sensex PE is 23 times.

Moving on to news from the banking sector. IDFC bank share price was up 2.2% in today's trade after it was reported Shriram Capital and IDFC Bank are set to begin 90 days of exclusive negotiations next week for an all-stock merger that could create a Rs 600 billion financial powerhouse, with both groups filling gaps in each other's businesses.

As per an article in The Business Standard, the merger with Shriram Capital will help the IDFC group to meet its financial inclusion targets and increase its retail portfolio. IDFC Bank's loan portfolio is made up predominantly of corporate and infrastructure advances.

With problems in the infrastructure sector and tepid demand for corporate credit, the bank has been aggressively looking at the retail and SME (small and medium enterprises) segments to expand business.

Meanwhile, RBL bank share price recovered in the afternoon session to finish up by 0.4%. The bank said that the divergence between its own gross bad loan estimates and those made by the RBI stood at Rs 3.39 billion at the end of 2015-16.

RBL Bank's gross non-performing assets (NPAs) as assessed by the RBI stood at Rs 5.47 billion for 2015-16, the bank said in its annual report. It had reported gross NPAs of Rs 2.08 billion as on 31 March 2016.

In news from airlines stocks, Interglobe Aviation (Indigo) share price finished the trading day on an optimistic note (up 1.1%) the company clarified that it only interested in taking over the international operations of national carrier Air India if the arrangement doesn't involve the government holding on to any stake in the airline.

The airline's interest in acquiring a stake in Air India arose out of its plans to operate low-cost long-haul flights out of India.

And here's a note from Profit Hunter:

The Nifty 50 Index ended the week on a strong note. On Monday, it opened the weekly session with 67 points gap up and continue to trade in an uptrend throughout the week. Finally, on Friday, the index witnessed minor profit booking on back of weak trends in global markets. The index ended the week with 1.46% gains.

Last week, the index closed below its 20-day exponential moving average (EMA), which was acting as a good support since January 2017. The RSI indicator had also slipped below its 50 level, which offered support during declines.

But the bulls did not give up as the index regained strength by closing above its 20 EMA and RSI again trading in its bullish territory above 50.

But the 9,700 level is now acting as a resistance for the index. It slipped twice from this level in month of June and this week also the index corrected after hitting a high of 9,700. We also observed highest open interest built-up in 9,700 strike, which means that this level will offer a strong resistance as indicated in our rollover report.

So will the bulls be able to push the index above 9,700 level to make a fresh high? Let's wait and watch...

The 9,700 Level - Hurdle in Near-Term
The 9,700 Level - Hurdle in Near-Term

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Jan 18, 2018 (Close)