Sensex Hits 38,000-Mark; Banking & Energy Stocks Gain the Most

Thu, 9 Aug 09:30 am

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Asian equities are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 1.4% while the Hang Seng is up 0.7%. The Nikkei 225 is trading down by 0.3%. Meanwhile, the S&P 500 closed slightly lower on Wednesday as falling crude prices and trade jitters held markets in check. The Nasdaq posted its seventh consecutive daily advance, while the Dow was down marginally.

Back home, Indian share markets have opened the day on a firm note. The BSE Sensex is trading higher by 116 points while the NSE Nifty is trading higher by 21 points. The BSE Mid Cap Index and BSE Small Cap index both opened the day up by 0.3%.

Sectoral indices have opened the day on a mixed note with bank stocks and energy stocks leading the gainers. While, consumer durables stocks and power stocks opened the day in red. The rupee is trading at 68.65 to the US$.

Energy stocks opened the day on a mixed note with Suzlon Energy & HPCL witnessing maximum buying interest. In the latest development, Hindustan Petroleum Corporation Ltd (HPCL) posted an 86% rise in net profit for the first quarter of the current financial year to Rs 17.2 billion backed by higher refining margins.

This is compared to a net profit of Rs 9.3 billion during the April to June quarter of 2017-18. The company's revenue also increased to Rs 729.2 billion as compared Rs 598.1 billion last year.

The combined gross refinery margin during the quarter was US$7.15 a barrel versus US$5.86 a barrel during the corresponding quarter last year.

The increase in profit is primarily due to higher refining margins due to inventory gains and also due to increased refining throughput and sales volume compared to last year.

During the quarter under review, the company had inventory gains to the tune of Rs 19 billion in refining and marketing.

During the quarter, crude prices have increased to US$73 a barrel as against US$49.8 a barrel during the first quarter of 2017-18. However, the impact of lower cracks was to the extent of US$3.3 a barrel.

The company's refineries at Mumbai and Visakh processed 4.52 million tonne (MT) from April to June this year, compared to 4.49 MT last year. During the quarter, HPCL also achieved its highest quarterly sales volume of 9.63 MT, posting a growth of 5% over last year.

The sales of petrol during the quarter increased by 6.9%, diesel by 2.7%, cooking gas by 11.3%, jet fuel by 9.9% and lubes by 22.9% during the quarter under review compared to last year.

HPCL's pipeline throughout increased to 5.45 MT posting a growth of 17% over last year.

Further, the company is set to automate all its 15,127 retail outlets by the end of 2018. For the current financial year, the company has planned a capital expenditure to the tune of Rs 84 billion in various projects across refineries and petrochemicals, marketing, pipelines and natural gas.

The company has also got authorisation from the Petroleum and Natural Gas Regulatory Board (PNGRB) to set up city gas distribution networks in Kolhapur (Maharashtra) and Ambala-Kurukshetra (Haryana) in joint venture with Oil India.

HPCL share price opened the day up by 2.3%.

Moving on to the news from the IPO space. The initial public offer of microfinance firm CreditAccess Grameen was subscribed 25% on the first day of bidding yesterday.

The nearly Rs 11.3-billion IPO received bids for 47,83,205 shares against the total issue size of 18.8 million shares.

The IPO, which is scheduled to close tomorrow, has been set in a price band for Rs 418-422 per shares.

The offer comprises of a fresh issue of equity shares aggregating up to Rs 6.3 billion and an offer for sale of up to 11.9 million shares (including anchor portion of 80,41,617 shares).

CreditAccess Grameen Limited is an Indian micro-finance institution focussed on providing micro-loans to women, predominantly in rural areas.

It has followed a strategy of contiguous district-based expansion across 132 district in eight states. Those states include Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh, Madhya Pradesh, Odisha, Kerala and Goa in addition to one union territory Puducherry.

To know more about the company, you can read CreditAccess Grameen's IPO note here (requires subscription).

Speaking of the IPOs, recently the IPO of HDFC Asset Management Company was subscribed a whopping 83 times! It listed today at a 58% premium.

Now, the question is: Why such a crazy rush for this IPO?

The short answer is the HDFC brand. The HDFC Group stocks have been such phenomenal wealth-creators that no investor wants to miss any opportunity to pick up a stock with the HDFC brand tag.

The chart below shows the number of times you could have multiplied your wealth by being an early investor in any HDFC Group company.

The HDFC Group of Multibaggers...

In the chart above, we have taken the prices for HDFC Ltd, HDFC Bank, and Gruh Finance. The returns translate as below:

HDFC Ltd delivered compounded returns of 28% over 28.6 years.

HDFC Bank delivered compounded returns of 27% over 23.2 years.

Gruh Finance delivered compounded returns of 22% over 25.5 years.

HDFC Standard Life Insurance delivered absolute gains of 75% in a little over eight months from its issue price of Rs 290 per share.

In Ankit Shah's premium newsletter Equitymaster Insider, he'd also recommended one HDFC Group company as a long-term investment. It's currently slightly above the recommended maximum buy price. But should it correct, it could be a lucrative opportunity to build long-term wealth (requires subscription).

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

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