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Indian Indices Trade on a Positive Note
Thu, 22 Sep 11:30 am

After opening the day on a firm note, the Indian stock markets continue to trade higher. Sectoral indices are trading on a positive note with stocks from the energy, finance and banking sectors leading the gains.

The BSE Sensex is trading up 188 points (up 0.7%) and the NSE Nifty is trading up 66 points (up 0.8%). The BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up 0.7%. The rupee is trading at 66.85 to the US$.

In a major news update from the global financial markets, the US Federal Reserve left interest rates unchanged on Wednesday. However, it strongly signalled that it could still tighten monetary policy by the end of this year as the labor market improved further.

Fed Chair Janet Yellen said US growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation. At a news conference, Yellen said that we judged that the case for an increase has strengthened but decided for the time being to wait.

Speaking of the possibility of further rate hikes, Janet Yellen said she expected one rate increase this year if the job market continued to improve and major new risk did not arise.

The Fed also projected a less aggressive rise in interest rates next year and in 2018, and cut its longer-run interest rate forecast to 2.9% from 3%.

At the same time, some policymakers of the Federal Open Market Committee (FOMC) have cut the number of rate increases they expect this year to one from two previously. According to the median projection of forecasts released with the statement, 3 of the 17 policymakers said rates should remain steady for the rest of the year.

The Fed last raised interest rates by 25 basis points for the first time in a decade in December 2015.

The concern is that global financial markets are behaving obediently to Fed and central banks cues. They are highly dependent on central bank behavior. Bill Boner, in a recent article from Vivek Kaul's Diary, wrote on how the Fed and the BoJ keep investors on the edge of their seats.

What one shall understand is that in most cases these monetary policies by central banks are doomed to fail. To really stimulate growth in the economy, what is needed is an actual increase in productivity rather than artificial boost through monetary policy measures.

This begs an important question: How can one avoid this volatility and profit despite such measures of central banks?

Asad Dossani, editor of Daily Profit Hunter, says Don't Fight Easy Money. He has written on how one can successfully trade such events and build a trading business.

If you're interested in knowing what's really happening in the world of man and money, you can claim your free copy of Bill Bonner's latest book Hormegeddon (just pay Rs 199 for shipping and handling).

Moving on to the news from the IPO space in the domestic markets... The mega IPO of ICICI Prudential Life Insurance oversubscribed 10.48 times on Wednesday, the last day of subscription.

As per a leading financial daily, the IPO received bids for 1387.7 million equity shares against issue size of 132.3 million (excluding anchor investors' portion). The reserved portion of qualified institutional buyers oversubscribed 11.83 times, while the non-institutional investors' category oversubscribed 28.55 times. The reserved category of retail investors oversubscribed 1.42 times and shareholders' 12.2 times.

The IPO is the biggest IPOs since Coal India's stake sale in October 2010. It is also the first pure play insurance company in India.

Here's Tanushree Banerjee, Equitymaster Co-Head of Research, writing about the IPO in a recent edition of the Research Digest (subscription required):

  • The IPO of ICICI Life Insurance not only has the lure if being a billion-dollar issue. But it will also be the first pure-play insurance company to be listed in India.

    Now, if you've seen the financial statements of banks and non-banking financial institutions, beware that insurance is a different animal altogether. What constitutes impressive financials and a strong balance sheet for insurance companies differs quite a bit from other financial entities.

    Valuing insurance businesses is going to be a novel experience indeed.

The insurer's parent ICICI Bank will be selling a 12.36% stake with this IPO.

Recently, there is a flood of Initial Public Offer's (IPO) hitting the market. Confused as to which ones to apply and which ones to avoid?

Last week we promised you a special handbook on IPO investing. The wait is finally over. Without further ado, we would like to present Equitymaster's Handbook of IPO Investing (with special focus on never before Insurance IPOs). Click here to get your free copy right away...

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

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May 26, 2017 10:58 AM

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