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Sensex Opens on a Strong Note; Auto & Energy Stocks Lead
Mon, 18 Sep 09:30 am | Karan Janani, TM Team

Asian stocks markets are higher in morning trade as investors anticipated clues on the direction of monetary policy from central banks later in the week. The Hang Seng is up by 1% while the Shanghai Composite is up by 0.3%. Stock markets in US closed their previous session to record levels.

Meanwhile, Indian share markets too have opened the day in green. BSE Sensex is trading higher by 184 points and NSE Nifty is trading higher by 70 points. S&P BSE Mid Cap and S&P BSE Small Cap are trading up by 0.8% and 1% respectively. Gains are largely seen in auto stocks, capital goods stocks and energy stocks. The rupee is trading at Rs 64.07 against the US$.

Bharat Petroleum Corporation Ltd (BPCL) share price opened the trading day on an encouraging note (up 1.2%) after it was reported that the company is in talks with the country's largest natural gas transporter GAIL (India) Ltd to acquire the government's majority stake in it for Rs 180-200 billion.

As per an article in The Livemint, the talks are at a nascent stage and the government has not formally approved the plan. BPCL plans to expand its range of businesses and the government has been informed about it. BPCL plans to invest Rs 1.08 trillion over the next five years to expand operations across its business segments.

According to the government's plan, state-run oil and natural gas explorer Oil and Natural Gas Corp. Ltd also is in the process of buying the government's 51.11% stake in fuel retailer Hindustan Petroleum Corp. Ltd.

If everything goes as per the plan, the consolidation in the energy industry through divestment of the government's stake in various oil and gas firms could generate significant non-tax revenues for the exchequer and help the government meet its disinvestment target of Rs 725 billion for the financial year.

Finance minister Arun Jaitley, in his budget speech, had announced the government's plans to merge state-owned energy firms in order to create integrated domestic oil majors to compete with global energy giants.

GAIL share price too opened the trading day up by 1.3% on the BSE.

Moving on to news from FMCG sector. As per an article in The Economic Times, ITC plans to open 40 new hotels adding around 5,000 rooms over a period of time. This is part of company's strategy to strengthen its hospitality business.

In the near term, the company is working on opening 10 new hotels in the next three- and-half years under its ongoing expansion program across different verticals entailing overall investment of Rs 250 billion.

Reportedly, nine of these hotels are in India and one in Colombo, Sri Lanka. This is part of ITC's 'India First' strategy. ITC's hotels business had posted consolidated revenue of Rs 14.14 billion in 2016-17, up from Rs 13.57 billion in 2015- 16.

Meanwhile, the company also decided to foray into fresh fruits, vegetables and upgraded series of e-choupal which it sees as potential areas for non-linear growth. ITC's agri business division has an annual turnover of about Rs 90 billion.

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As per the reports, the division's growth is partly aligned with the company's FMCG business. It would also unveil variants of potatoes soon followed by dehyrdrated onions. A number of these new products provide opportunities for growth.

ITC share price opened up by 0.8%

In news from IPO segment, ICICI Lombard General Insurance Rs 57 billion IPO which opened on Friday got subscribed 26.91% at the end of day one of bidding. The quota reserved for QIB (qualified institutional buyers) was subscribed 62.06% while NII (non-institutional investors) category got subscribed 3.85%.

The shares reserved for retail investors was subscribed 18.14% at the end of the first day of bidding. The public offer will remain open until 19 September 2017. The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and to carry out the sale of up to 86,247,187 equity shares by the selling shareholders.

Among other general insurance companies, General Insurance Corp of India and New India Assurance Company are also planning to come up with their IPOs. Various estimates put India's insurance market size at US$100 billion. Analysts say it can become a dominant theme on Dalal Street in the years to come.

IPO Subscription Times (2017)

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. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

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. A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it.

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Mar 20, 2018 (Close)