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Sensex Opens 180 Points Lower; Realty & Healthcare Stocks Fall
Wed, 6 Sep 09:30 am

Asian stock indices are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.31% while the Hang Seng is down 1.05%. The Shanghai Composite is trading is trading down by 0.4%. US stocks sank yesterday, with the S&P 500 stumbling to its biggest single-day loss in about three weeks, as investors weighed fresh tensions with North Korea.

Back home, share markets in India have opened the day on a negative note. The BSE Sensex is trading lower by 184 points while the NSE Nifty is trading lower by 56 points. The BSE Mid Cap and BSE Small Cap index opened the day down by 0.6% & 0.4% respectively.

Barring consumer durables stocks, all sectoral indices have opened the day in red with stocks from healthcare sector and realty sector leading the losses. The rupee is trading at 64.12 to the US$.

In the news from aviation sector. Livemint reported that InterGlobe Aviation Ltd-run IndiGo may consider investing in Jet Airways (India) if it fails to acquire a stake in Air India.

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The company is convinced there is an opportunity for a large India-based airline with a significant international footprint.

One must note that, IndiGo was the first to send in its interest in Air India to the government, the day the latter decided to sell a stake in the state-run airline.

India's aviation industry is on a high-growth trajectory. India's domestic air passenger traffic has almost doubled in the past six years on the back of strong economic growth and emergence of low-fare airlines.

Indian carriers have now set their sights on International traffic. Indian carriers have been slowly increasing their market share. It is important to note that foreign carriers still dominate international traffic to and from India.

Domestic Airlines Fly High in Foreign Skies

As per the report by rating agency ICRA, the share of domestic airlines in India's international traffic increased from 30.1% in FY14 to 35.1% in FY17.

Why are air carriers focusing on international traffic? Indian carriers are chasing international routes to increase their revenues and profit margins. International routes traditionally deliver higher margins for airlines.

But does this mean international routes are more profitable than domestic ones? Rahul Shah, Co-head of Research has an answer to this:

  • "Not really. If you see the recent results of air carriers such as Jet Airways and Indigo, the international segment did worse than the domestic business in FY17. This is due to higher competition, weak international market (particularly Gulf region) and higher cost.

    It is important to note that certain industries have relatively dull economics compared to others. And investors would do well to keep this in mind, particularly in the case of aviation. Investors need to understand the industry dynamics before buying up aviation stocks."

Indigo share price opened down by 1.8%.

Moving on to the news from the IPO space. Two companies, Bharat Road Network & Dixon Technologies are bringing their IPOs to the market today. The initial public offerings of both these companies will be open for subscription from 6th-8th September.

Dixon Technologies (India) expects to raise Rs 6 billion from its IPO today. The company plans to spend the proceeds on capacity expansion and debt repayment. It plans to offer about 33,93,425 equity shares of face value of Rs 10 each amounting to Rs 5.99 billion on the upper price band.

Further, it has raised Rs 1.8 billion by selling 1.02 million shares to institutional investors.

Meanwhile, Bharat Road Network also opened its IPO for subscription today aiming to garner around Rs 6 billion.

At least 75% of the issue will be allotted on a proportionate basis to qualified institutional buyers, of which the company may allocate up to 60% of the QIB portion to anchor investors, on a discretionary basis.

Do these companies have sound business models? Are they leaving enough money on the table for investors?

We have released our IPO note on both the above IPOs. You can access the same in our IPO section.

With so many new IPOs set to hit the market, it is prudent to be ready with a strategy to take advantage of the frenzy.

It's good to be very selective when investing in IPOs. Carefully analyse each company for its own merits and don't give in to the hype surrounding the public offering.

That's Ankit Shah's approach at Equitymaster Insider. He keeps a sharp eye on developments in the IPO space and keeps his readers up to date on the big-ticket IPOs.

Ankit and his team of researchers constantly refer this handbook on investing in IPOs. You can download a copy for yourself. It's free. Just click here.

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Mar 16, 2018 (Close)