Sensex Trades on a Volatile Note; FMCG Stocks Lead Gains

Mon, 9 Oct 01:30 pm

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After opening the day in green, share markets in India witnessed choppy trades and pared early gains and are currently trading marginally above the dotted line. Sectoral indices are trading on a mixed note with stocks in the consumer durables sector and stocks in the FMCG sector leading the gains. Stocks in the energy sector are trading in red.

The BSE Sensex is trading up by 26 points (up 0.1%), and the NSE Nifty is trading up by 7 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading up by 0.6%. The rupee is trading at 65.35 to the US$.

In news from stocks in the aviation sector. According to an article in Livemint, the Tata Group is considering buying Air India.

According to the article, Tata Sons Ltd executive chairman N. Chandrasekaran has said the group will look at Air India Ltd disinvestment being executed by the government currently. The group, however, needs more details from the government on the process.

In 2000, the Tata group and Singapore Airlines had expressed their interest in acquiring up to 40% of Air India. In 2013, after a meeting with then aviation minister, Ratan Tata had said the Tata group would be interested in buying a stake in Air India if the government were to privatize the airline.

Notably, Air India was launched in 1932 by J.R.D. Tata as Tata Airlines. Its name was changed to the current one in 1946. The government decided to take it over in 1953.

Tata's interest in the airline comes at a time when India's aviation industry is on a high-growth trajectory. India's domestic air passenger traffic has almost doubled in the past six years. This is on the back of strong economic growth and emergence of low-fare airlines. Indian carriers have now set their sights on International traffic. Indian carriers have been slowly increasing their market share. It is important to note that foreign carriers still dominate international traffic to and from India.

Domestic Airlines Fly High in Foreign Skies

As per the report by rating agency ICRA, the share of domestic airlines in India's international traffic increased from 30.1% in FY14 to 35.1% in FY17. In the coming years, this share is expected to increase as the government replaced the 5/20 rule with 0/20 rule. The 5/20 rule mandates that airlines need to fly at least 5 years domestically and should possess 20 aircraft. The new 0/20 rule does away with the five-year requirement, but carriers will still need to demonstrate a fleet of 20 aircraft.

It is important to note that certain industries have relatively dull economics compared to others. And investors would do well to keep this in mind, particularly in the case of aviation. Investors need to understand the industry dynamics before buying up aviation stocks.

As Tanushree point out in a recent edition of the 5 Minute Wrapup:

• Airlines is an industry that lures investors in with its glitz, glamour and growth potential. But what glitters ain't always gold, my dear reader. The industry's costs are massive. So is debt. Competition is intense. And fortunes change with the winds of international developments. And after all that altitude, there is not a landing strip in sight - many report losses and the return on capital is extremely poor.
  
  So when returns from capital-intensive, debt-heavy companies start nosediving, and stock prices fall, dear investor, remember my safety-first rule, dump these gruesome stocks, and head for safer ground.

Moving on to news from stocks in the IPO space. MAS Financial Services Ltd's initial public offering (IPO) was subscribed 2.19 times on Monday, the second day of the shares sale.

As of 12pm, the IPO received bids for 15,605,696 shares against the total issue size of 7,124,910 shares, according to data available with NSE. The Rs 4.6 billion IPO will close on 10 October.

MAS Financial is a Gujarat-based non-banking finance company (NBFC), primarily focused on middle and low-income customer segments. The company offers business and financing products such as micro-enterprise loans, small and medium enterprise loans, two-wheeler loans, commercial vehicle loans and housing loans.

To know our view on the IPO, click here.

Meanwhile, Indian Energy Exchange (IEX) kicks off its IPO today. The company has fixed a price band of Rs 1,645-1,650 per share for its public issue and will remain open from 9 to 11 October. It aims to raise about Rs 6 million through the share sale.

IEX is India's first power exchange, which provides automated trading platform for electricity and renewable energy certificates.

We have released a recommendation note for the IPO. You can find it here.

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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