Sensex Opens Marginally Up; Tata Motors Gains Post June JLR Sales Data

Tue, 11 Jul 09:30 am

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Asian equity markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.35%, while the Hang Seng is up 1.02%. The Nikkei 225 is trading up by 0.27%. The US stocks ended mostly higher led by gains in technology stocks as investors were optimistic ahead of earnings.

Meanwhile, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 60 points, while the NSE Nifty is trading higher by 24 points. The BSE Mid Cap Index and BSE Small Cap index both opened the day up by 0.2%.

Barring consumer durables stocks and metal stocks, all sectoral indices have opened the day in the green with information technology stocks and automobile stocks leading the pack of gainers. The rupee is trading at 64.54 to the US$.

Tata Motors share price surged 2% after the company said that the sales of its luxury unit Jaguar Land Rover (JLR) rose 11% to 51,591 in June over last year, driven by healthy China market.

Jet Airways share price rose 1.9% on the reports that global airlines Lufthansa, KLM-Air France, and Delta as well as major private equity funds including the Blackstone Group, KKR & Co and TPG Capital are in the race to acquire a stake in Indian carrier Jet Airways.

According to a report in The Economic Times, the companies are looking to invest US$200-250 million in the country's second largest airline.

Steel stocks opened the day on a mixed note with Tayo Rolls Ltd and Jindal Saw Ltd leading the gains. As per an article in a leading financial daily, Tata Steel has commissioned a solar power plant at its iron ore mines in Noamundi, as part of its initiative towards reducing carbon footprint.

The company set up a 3 MW Solar Photovoltaic (PV) Power Plant at Noamundi, at an investment of Rs 0.35 billion.

Incidentally, it is also the first solar power plant to be set up in any iron ore mine in the country. The project, which will serve the company's captive requirement around its mining locations, was executed by Tata.

Set up at a cost of Rs 0.35 billion and covering 19 acres, the power from the plant, Tata Steel will be the sole buyer at a contracted tariff. The selected site has a potential of 4.5 MW solar power generation.

The project came to light as a result of the synergy between three Tata group companies - Tata Steel, Tata Power Solar and Tata Power Trading Company.

Speaking of the renewable energy sector, and especially solar, has seen their fortunes change at a rapid pace. Leaps in technology have made renewables increasingly cheaper to produce (Subscription required) relative to traditional thermal power (coal-based). While thermal is still the cheapest to set up, the gap has quickly narrowed in the past few years and is now down to a whisker.

Costs of Setting Up Various Types of Power Plants

Rahul Shah, Co-head of Research, pointed out that a few of the renewable energy projects are already running into financial troubles. Can we rule out a similar fate for the other projects?

In his view, investors should not get carried away by the hoopla surrounding renewable energy projects. It's a much-needed initiative to reduce the pollution levels across the country. However, investors in this space must be extremely cautious.

Tata Steel share price opened down by 0.2% while Tata Power share price opened up by 0.1%.

Moving on to the news from the IPO space. As per an article in a leading financial daily, State Bank of India's (SBI's) executive committee of the central board has given the final approval for divestment of 80 million shares in SBI Life through an initial public offering (IPO).

SBI Life, the subsidiary of India's largest lender had earlier announced offloading 12 percent stake through the IPO. SBI will dilute 8% stake while BNP Paribas Cardif will sell 4%.

SBI Life will be only the second life insurer to list since the government allowed foreign investors to increase stake in national insurers to 49% from 26% earlier. ICICI Prudential Life Insurance was the first to list in September 2016 after the norms were relaxed.

It remains to be seen how the issue is priced, more so in light of the market expecting brisk growth from the company. And considering that the insurance business is quite a different beast compared to most other companies, valuation tends to be a tricky affair.

Meanwhile, our big-picture editor, Vivek Kaul, recently penned a pertinent report on the entire insurance industry. We strongly recommend you go through the full report on what's really happening in the insurance industry in India...and how it affects you. If you have not accessed Vivek Kaul's Letter yet, sign up here.

By the way, we have also prepared a guide to help you understand the valuation of insurance businesses.

Speaking of IPO space, we don't need thousands of IPOs to get rich. That's not how super investors make their fortunes. But a few good IPOs could certainly become the multibaggers in your portfolio in a few years.

Download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

To understand this terrain, you may want to download our report - Handbook of IPO investing, which has a special section on the valuation of insurance companies. This will help you demystify the complexities of the industry before you attempt to invest in insurance IPOs.

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

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