Sensex Opens in Red; Infosys Tanks as CEO Vishal Sikka Resigns

Fri, 18 Aug 09:30 am

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Asian indexes are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.2%, while the Hang Seng is down 0.7%. The Nikkei 225 is trading lower by 0.9%. US stocks closed lower over disappointing earnings from major companies. The S&P 500 closed down by 1.5%.

Back home, share markets in India have opened the day on a weak note. The BSE Sensex is trading lower by 228 points, while the NSE Nifty is trading lower by 63 points. The BSE Mid Cap and BSE Small Cap index both opened the day down by 0.6% & 0.7% respectively.

Majority of the sectoral indices have opened the day in the red with bank stocks and software stocks leading the losses. The rupee is trading at 64.12 to the US$.

Infosys share price opened the day 5.9% lower as the company's CEO and MD Vishal Sikka announced his resignation with immediate effect.

In news from the IPO space. According to a leading financial daily, HDFC Standard Life Insurance Company, or HDFC Life, is likely offload 15% of existing shares through its proposed initial public offering (IPO) in the coming months. The company is expected to file the draft red herring prospectus (DRHP) with the regulator on within the next few days. This follows soon after General Insurance Corp (GIC) and New India Assurance Co. (NIA) also filed their DHRP with the regulator last week.

HDFC Life, plans a total stake dilution of 15%. HDFC will sell 9.6% holding in the insurance firm while its partner Standard Life will sell 5.4%.

HDFC currently holds 61.5% of the issued and paid-up share capital of HDFC Life, Standard Life owns 35%, while the remaining is with employees and PremjiInvest.

HDFC Life could attract a significant valuation. Last month, HDFC Life board had approved selling up to 20% of its equity in a public offering. The insurer had earlier sought the approval of the insurance regulator IRDAI for the IPO.

Another private sector insurer, SBI Life, has already filed prospectus for an IPO.

HDFC Life is the third largest private life insurance company in the country. It has a market share of 6.8%.

By combining and compounding underwriting profits and stock returns year after year, insurance companies can produce very high returns. This is why Equitymaster Insider Ankit has been watching some of the largest insurance companies in India, particularly SBI Life and New India Assurance, which will both be listing on the exchanges soon.

IPO Market Buzzing

The IPO market has been on a firm uptrend since FY15. In FY17, the amount of money raised through 25 IPOs nearly doubled to Rs 282 billion.

IPOs are all the rage in the share markets these days. With new companies listing by the day, all with promises of superior returns.

However, 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.

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

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Moving on to news from the pharma sector. The government has proposed to dilute the powers of the National Pharmaceutical Pricing Authority (NPPA), the body that regulates drug prices.

The government proposes to revamp the country's drug pricing regulator, allowing it to set prices of only essential medicines.

The draft pharmaceutical policy, prepared by the department of pharmaceuticals has proposed that an advisory body, members of which will include industry representatives nominated by the government, will assist the NPPA in fixing prices. And prices once fixed by the NPPA can't be revised unless directed by the government or by courts, the draft policy proposed.

One must note that the NPPA's recent decisions to cap prices of cardiac stents and knee implants have been criticized by the industry.

The current draft policy if formalized could take away the price fixing ability of the NPAA and could limit it to only essential drugs. While this would seem beneficial for the domestic pharma industry, it could encourage profiteering.

The draft policy also proposes to bring all pharma regulators under a single department.

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