Sensex Opens Marginally Down amid North Korea Tensions

Fri, 15 Sep 09:30 am

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Majority of Asian stock markets are lower today amid geopolitical concerns. The Shanghai Composite is off 0.35% while the Hang Seng is down 0.52%. The Nikkei 225 is trading up by 0.1%. The US stock indices finished Thursday's trading session mixed, the Dow climbed to a new record closing high, while the Nasdaq and S&P 500 ended lower.

Back home, share markets in India have opened the day on a flattish note with negative bias after North Korea fired another missile over Japan into the Pacific Ocean. The BSE Sensex is trading lower by 23 points while the NSE Nifty is trading lower by 14 points. The BSE Mid Cap and BSE Small Cap index opened the day down by 0.2% & 0.1% respectively.

Except, information technology sector, all sectoral indices have opened the day in red with stocks from power sector and metal sector witnessing maximum selling pressure. The rupee is trading at 64.07 to the US$.

Coal India share price surged on BSE in the opening trade after it was reported that the company is looking to diversify from its core business of coal extraction and become a full-fledged mining company in a bid to mitigate the growing pressure from renewable energy.

Fertilizer stocks opened the day on a mixed note with Deepak Fertilisers & Southern Petrochemicals leading the losses. As per an article in a leading financial daily, Tata Chemicals is in advanced stages of discussions with Indorama Holdings BV, Netherlands (subsidiary of Indorama Corporation, Singapore), for the potential sale of its phosphatic fertiliser business located at Haldia and the trading business comprising of bulk and non-bulk fertilisers.

The two companies have signed a mutually agreed exclusivity agreement in this regard which expires on 31 October 2017.

The transaction, if materialised, would involve the transfer of Haldia plant, trading Business along with immovable, movable properties, working capital and product brands but excluding outstanding subsidy amounts.

Further, if the deal goes through, Tata Chemicals will exit the fertiliser business completely. The company is expected to receive consideration in the range of Rs 4 billion to Rs 5 billion.

In August last year, Tata Chemicals sold its urea plant in Babrala, Uttar Pradesh, to the Indian unit of Norway-based Yara International for Rs 26.7 billion. The company is awaiting final NCLT approval for the deal.

Tata Chemicals share price opened the day down by 0.4%.

Moving on to the news from IPO space. ICICI Lombard General Insurance Company, India's largest private sector non-life insurer in India (in terms of gross direct premium income (GDPI), is launching the initial public offer of its shares today, the first of its kind by any general insurance company in India.

The Rs 57 billion public issue of ICICI Lombard will give the company a valuation of Rs 300 billion post the issue. The issue will be open for three days through September 19.

Priced in a band of Rs 651-661, the issue can be subscribed in lot sizes of 22 shares.

Meanwhile, the company has raised Rs 16.3 billion by allotting 25 million shares to 64 anchor investors at the upper band of Rs 661 apiece.

We have released our IPO note on ICICI Lombard IPO. You can access the same in our IPO section.

Interestingly, five insurance company offerings are expected to raise a whopping Rs 400 billion collectively by the end of the year. With life and general insurers queuing for the IPO route, it would be interesting to see how quickly HDFC Life progresses on this.

The insurance sector in India is set to grow leaps and bounds. It is only a matter of time that this sector will witness a flurry of M&A activities which will require the regulator to act swiftly and proactively as far as matters such as approval are concerned.

Our big-picture editor, Vivek Kaul, recently penned a pertinent report on entire insurance industry. We strongly recommend you go through the full report on what's really happening in the insurance industry in India...and how it affects you. If you have not accessed Vivek Kaul's Letter yet, sign up here.

By the way, we have also prepared a guide to help you understand the valuation of insurance businesses.

One space which tests the investor's contrarian philosophy is the IPO space. The demand for IPO's has reached sky-high levels. Avenue was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately.

The market euphoria is something similar to what was seen in 2007-08. Avenue was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately.

IPO Back in Demand

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space.

Here's what Richa Agarwal wrote in the recent edition of The 5 Minute WrapUp:

• "A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not."

Download this FREE report now and discover How to Get Rich with 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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