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Sensex & Nifty Open Flat on Dull Macroeconomic Data
Wed, 13 Sep 09:30 am | Rini Mehta, TM Team

Stock markets across Asia are mixed today. The Hang Seng is lower by 0.44% while the Shanghai Composite is even. The Nikkei 225 is trading up by 0.47%. On Tuesday, the major Wall Street indices hit record closing highs with financial stocks leading the charge. The S&P 500, Dow Jones Industrials and Nasdaq Composite clocked record closes.

Back home, share markets in India have opened the day on a flat note tracking dismal macroeconomic data. The BSE Sensex is trading higher by 24 points while the NSE Nifty is trading higher by 7 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.4% & 0.3% respectively.

Except, capital goods sector, healthcare sector and FMCG sector, all sectoral indices have opened the day in green with stocks from power sector and energy sector witnessing maximum buying interest. The rupee is trading at 63.95 to the US$.

In the latest development, the Central Statistics Office released the data on the Index of Industrial Production (IIP) and consumer price index (CPI)-based inflation yesterday.

The IIP data showed that economic activity was yet to pick up. Food items becoming more expensive and some services turning pricier because of the goods and services tax (GST) meant CPI-based inflation remained high.

In July, the IIP grew by only 1.2% over the same month last year, recovering slightly from a contraction of 0.1% in June.

The low expansion in July this year seems to be due to negligible growth of 0.1% in the manufacturing sector that had seen low demand due to the roll out of the goods and services tax.

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However, electricity generation grew by a robust 6.8% in July while mining expanded by 4.8%.

Meanwhile, retail inflation rose to a five-month high of 3.4% in August due to costlier vegetables and fruits. The consumer price index (CPI) based inflation stood at 2.4% in the previous month.

The August inflation number is the highest since March 2017, when it was recorded at 3.9%.

However, the Finance Ministry continued to be hopeful that the benefits of demonetisation and the roll out of the goods and services tax will increase the size of the formal economy and bring in more revenue.

But whether the gains accrue this fiscal or over the medium term is yet to be seen.

Meanwhile, the chart below shows how India's inflation and policy rates stand in comparison with other Asian economies.

India's Policy Rates Compared to Asian Economies

However, the central bank expects inflation to rebound soon. The RBI's monetary statement in June had projected quarterly average inflation in the range of 2-3.5% in the first half of fiscal 2018, and 3.5-4.5% in the second half. Now it expects inflation to be about 4% by the year end. As long as inflation follows this track, the possibilities of rate cuts during this fiscal year remain slim.

Rate cut or not, at Equitymaster we do not attempt to predict how and when macroeconomic developments will unfold. Instead, we focus on the fundamentals and the underlying business strength of companies. The ValuePro team is always on the lookout for all-weather stocks whose fortunes are not tied to economic cycles.

Moving on to the news from IPO space. The initial public offering (IPO) of Matrimony.com got fully subscribed on the second day of the bidding process on Tuesday.

The IPO of the owner of online match making portal BharatMatrimony.com received bids for 38,21,220 shares against the total issue size of 28,11,280 shares.

The public offer got subscribed 1.36 times on the second day.

Meanwhile, Capacit'e Infraprojects IPO will open for subscription from today onwards. An asset-light business model and a Rs 46 billion order book that includes clients such as Rustomjee, Lodha, Oberoi and Godrej seeks to raise 4 billion from the market.

The company has raised Rs 1.2 billion by selling shares to institutional investors as part of the so-called anchor book allocation.

Institutional investors bought 4.8 million shares of the company at the upper end of the price band. The Rs 4 billion IPO will see the company dilute 24% stake.

So, 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 reference this handbook on investing in IPOs. You can download a copy for yourself. It's free. Just click here.

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

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Mar 16, 2018 (Close)