Sensex Trades on a Volatile Note; Pharma Stocks Drag

Fri, 8 Sep 01:30 pm

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After opening the day in green, share markets in India witnessed volatile trading activity and are currently trading flat. Sectoral indices are trading on a mixed note with stocks in the capital goods sector and the metals sector trading in the green, while stocks in the realty sector and the pharma sector are leading the losses.

The BSE Sensex is trading up by 9 points (up 0.1%), and the NSE Nifty is trading up by 5 points (up 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.4%, while the BSE Small Cap index is trading up by 0.1%. The rupee is trading at 63.92 to the US$.

In news from the automobile sector, auto companies, selling large sedans and SUVs, are witnessing a surge in demand since last month. Consumers are rushing towards these companies in lieu of an expected price hike on these goods owing to a cess in the GST regime.

The government approved an ordinance to increase ceiling on cess to 25% from the present 15% over the peak rate of 28% GST on luxury cars and sports utility vehicles (SUVs).

The exact quantum of the increase and its timing will be decided by the GST Council tomorrow.

The decision has upset the growth plans of the luxury car industry, which had seen a flat performance in 2016, owing to demonetisation and the ban on 2,000cc diesel cars in the National Capital Region for the first eight months of the year. The sudden increase in demand has left high-end carmakers unenthused, as they fear the impending cess hike to flatten out demand.

The decision to increase the cess was taken after the Council found the taxes on these cars were lower under the GST regime than the indirect taxation system.

Prices of most such vehicles had turned significantly cheaper in most states following the introduction of the GST on July 1. However, uncertainties over GST implementation pulled down sales of passenger vehicles (cars, utility vehicles and vans) in June.

Car Sales Hit GST Bump

Domestic passenger vehicle sales declined by 11.2% to 198,399 units in June from 223,454 units in the same month last year, according to data released by the Society of Indian Automobile Manufacturers (SIAM). This is the first decline in six months as dealers avoided picking up fresh stocks from companies ahead of GST implementation with a view to avoid transitional loss. Similarly, this decline was the steepest fall in 51 months, since March 2013, when sales declined by 13%. Most players, including Hyundai, Mahindra & Mahindra, Toyota and Tata Motors, reported a decline.

The overall automotive industry witnessed some volatility during the first quarter of FY18, as the market experienced uncertainty post the BS-IV transition issues and prior to GST implementation, and automakers, besides offering pre-GST discounts, made efforts to re-align inventories.

Speaking of the impact of GST, our colleague Vivek Kaul has studied the finer aspects of the GST and predicted what could go right and wrong.

Download his special report - The Good, the Sad and the Terrible (GST).

Moving on to news from the IPO space. According to a leading financial daily, SBI Life Insurance Co. Ltd, a joint venture between State Bank of India and BNP Paribas Cardif, has received the market regulator's approval for an initial public offering (IPO). The insurer plans to raise over Rs 85 billion through the IPO proceeds. The life insurer is looking to launch the IPO on 20 September.

SBI Life had filed its draft red herring prospectus with the regulators in July. According to the document, SBI and BNP Paribas will sell 80 million and 40 million shares respectively, amounting to a combined 12% stake.

Two state-run general insurers-General Insurance Corp. of India and New India Assurance Co.-as also two private sector insurance firms - ICICI Lombard and HDFC Standard Life - have lined up IPO plans and will list shortly.

In related news, two IPOs viz. Dixon Technologies and Bharat Road Network are making waves in the market with their initial share sale offers. 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. Its public issue was subscribed 4.3 times as of yesterday's close.

Meanwhile, Bharat Road Network (BRN), 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. As of yesterday's close, BRN's public issue was subscribed by 70%.

Today is the final day for both the IPOs.

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

With multiple offerings lined up, it becomes difficult to evaluate and pick out the best opportunity, if any exists. Not all IPOs will have fortunes like the D-Mart IPO, as the IPO game is inherently rigged against the retail investor.

We don't need to back all the IPOs to get rich. But a few good IPOs could certainly become the multibagger in your portfolio in a few years.

We have come out with a special report titled, How to Get Rich with IPOs. It is a comprehensive report that aims to cut through all the hoopla surrounding IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

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

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