Sensex Trades Marginally Lower; Telecom Stocks Witness Losses

Mon, 4 Sep 11:30 am

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Share markets in India are presently trading marginally lower. Sectoral indices are trading on a mixed note with stocks in the telecom sector and realty sector witnessing maximum selling pressure. Energy stocks> are trading in the green.

The BSE Sensex is trading down 100 points (down 0.3%) and the NSE Nifty is trading down by 30 points (down 0.3%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 63.99 to the US$.

In the news from IPO sector, Apex Frozen Foods made a strong debut on the bourses today. The company, which ran its IPO between August 22-24, got listed at Rs 199.90 on BSE today. This represents around 14% premium over its issue price of Rs 175.

Apex Frozen Foods is an integrated producer & exporter of shelf stable quality aquaculture products. The company supplies its ready-to cook products to a diversified customer base consisting of food companies, retail chains, restaurants, club stores and distributors spread across the developed markets of USA, UK and various European countries.

This is an Andhra Pradesh based company with its processing facility located at Kakinada. It has capacity to process 9,240 MTPA of finished products. Another processing facility to process 3,000 MTPA of finished products is operated by it which is owned by Royale Marine Impex Private Limited located at Bapatla. The processing facilities are supplemented by cold storage facilities located at Kakinada and Bapatla.

The output majorly comprises of variants of processed Vannamei shrimp (White shrimp) and is sold under the brands owned by the company's customers and also through its brands namely Bay fresh, Bay Harvest and BayPremium. The company strategically focuses on the market of USA, which is the largest importer of aquaculture products in the world.

To know more about the company, you can read our IPO note on Apex Frozen Food Ltd.

Speaking of IPOs, two IPOs viz. Dixon Technologies and Bharat Road Network are headed to the market with their initial share sale offers this week. The initial public offerings of both these companies will be open for subscription during 6th-8th September.

Dixon Technologies, a consumer electronics manufacturer, has fixed a price band of Rs 1,760-1,766 per share for its IPO, through which it aims to raise about Rs 6 billion. Meanwhile, Bharat Road Network, a Srei Infrastructure Finance initiative, has fixed price band of Rs 195-205 per share for its IPO and also aims to raise Rs 6 billion.

Fundraising through initial public offerings (IPOs) is set to hit a record high this calendar year, as fifteen companies have already raised more than Rs 125 billion (till July), with much bigger offerings in the pipeline.

Further, five insurance company offerings are expected to raise a whopping Rs 400 billion collectively by the end of the year. State-owned General Insurance Co of India and New India Assurance Ltd, which have both filed their draft red herring prospectus (DHRP) with the regulators, are expected to raise a mammoth Rs 100 billion each. Similar offerings from SBI Life Insurance, ICICI Lombard General Insurance, and HDFC Standard Life Insurance are set to raise around Rs 70 billion, Rs 50 billion, and Rs 75 billion, respectively.

These five offerings themselves are set to make 2017 the biggest IPO year ever - even bigger than 2010, when 64 companies raised a collective Rs 375 billion through their IPOs.

To know which IPOs to subscribe to, you can download our FREE report How to Get Rich with IPOs. This report will show you how to safely profit from the 2017 IPO rush.

In the news from automobile sector, President Ram Nath Kovind has promulgated an ordinance to raise the compensation cess levied on luxury, sports utility and large cars under the Goods and Services Tax (GST) regime to 25% from 15% earlier.

The above development comes as the Union Cabinet approved recommendation of the ordinance last month.

The GST Council will now take a call on the implementation of the higher cess as also the quantum of increase.

Automobile manufacturers may face some hiccups on the back of above development. Also, executives from auto industry say they may re-evaluate their business plans owing to the above development. Meanwhile, we'll keep you posted on the recent developments from this space.

Speaking of automobile sector, there's a change of preference seen for first time car buyers in India. As per the data, the new generation of first-time buyers is moving up the ladder to premium cars. This is evident from the chart below:

Changing Preference of First Time Car Buyers

As can be seen, first-time car buyers are now buying costlier models such as the Swift or the Dzire. First-time car buyers accounted for 31% of Swift sales in FY14. That number jumped to 52% in the June quarter of FY18.

The above trend is similar to what has happened in other consumer segments such as mobile phones and consumer electronics. It indicates a shift towards premiumization in India's car market. As we wrote in a recent edition of The 5 Minute WrapUp...

• The growing preference for these feature-rich and costlier models as first cars indicates growing premiumization in India's car market. This trend indicates that first-time buyers are getting more aspirational. Interestingly, the age profile of first-time car buyers and higher disposable income are contributing to this phenomenon.
  
  If this trend continues, going forward, one would see compact SUVs becoming the preferred choice for first-time buyers. The trend is already under way. The percentage of such buyers for Brezza for instance stood at 37% in the first quarter of FY18.

With the above shift, premiumization will be an important growth driver for the auto industry in coming years.

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

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