Indian Indices Continue Momentum; Telecom Stocks Witness Buying

Wed, 11 Oct 11:30 am

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After opening the day on a positive note, stock markets in India have continued their momentum. Sectoral indices are trading on a positive note with stocks in the telecom sector and oil & gas sector witnessing maximum buying interest.

The BSE Sensex is trading up 140 points (up 0.4%) and the NSE Nifty is trading up 41 points (up 0.4%). The BSE Mid Cap index is trading up by 0.5%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 65.31 to the US$.

In the news from commodity markets, crude oil is witnessing buying interest today. The commodity witnessed most of the gains in yesterday's trade after Saudi Arabia said it would cut oil exports in November. Also, a big chunk of US offshore production remained offline which further added to the gains.

As per the news, the Saudis have sought to expedite Organisation of the Petroleum Exporting Countries' (OPEC's) effort to drain a global glut of crude oil by capping exports in addition to making voluntary production cuts. OPEC and other crude exporters led by Russia are keeping 1.8 million barrels a day off the market.

The above news led to optimism of lower supply levels and aided crude oil prices.

One shall note that the OPEC and non-OPEC producers including Russia have agreed to reduce crude oil output by about 1.8 million barrels per day (bpd) until March in order to reduce global oil inventories and support prices.

The group is now in talks to extend the above expiry in March.

To keep a tab on the movements in crude oil and other commodities, you can read the stock market commentary from the Daily Profit Hunter team. Their commentary tracks the developments in the global economy as well as stock, currency, and commodity markets.

In the news from the IPO space, General Insurance Corporation of India (GIC's) 113 billion IPO is open for subscriptions from today.

General Insurance Corporation of India (GIC Re), a leading Government PSU, was incorporated in 1972 and is the largest re-insurance company in India. It provides reinsurance for various general insurance products.

GIC Re is the largest reinsurance company in India in terms of gross premiums accepted in Fiscal 2017, and accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during Fiscal 2017.

According to CRISIL Research, it ranked as the 12th largest global reinsurer in 2016 and the 3rd largest Asian reinsurer in 2015, in terms of gross premiums accepted. GIC provides reinsurance across many key business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance.

Further, the company has diversified its business geographically to grow the underwriting business and profitability as well as to maintain a balanced portfolio of risks. Its gross premiums on a restated consolidated basis from the international business in Fiscal 2017, Fiscal 2016 and Fiscal 2015 were Rs 103,004.5 million, Rs 83,396.9 million and Rs 66,094.5 million, respectively, and its gross premiums have grown at a CAGR of 24.8% from Fiscal 2015 to Fiscal 2017. In Fiscal 2017, Fiscal 2016 and Fiscal 2015, its gross premiums for risks outside of India were 30.5%, 45% and 43.3%, respectively, of its total gross premiums.

That said, is the company leaving enough money on the table for investors? We recently released our IPO note for the above IPO. You can access the same in our IPO section.

Speaking of IPOs, 2017 is set to be a record year for initial public offerings. However, is it worth investing in IPOs?

If past record is anything to go by, barring a few names that have quality, most IPO companies fail to live up to the hype. Also, the BSE IPO index has underperformed the Sensex over the past decade, as can be seen from the chart below:

BSE IPO Index vis-a-vis Sensex

So, an investor blindly following the IPO hype might have done better following the Sensex.

But does that mean that we should completely ignore IPOs? Here's a snip from a recent issue of The 5 Minute WrapUp answering the same...

• While it's necessary to be cautious on IPOs, you don't need to completely ignore them either.
  
  For every Reliance Power - like issue, there have been issues like Maruti, TCS, and Jubilant Foodworks Ltd (with returns over 4,000%, 1,000% and 500% respectively) that have made investors rich.
  
  The percentage of such issues, unfortunately, is very low (Check this IPO performance snapshot). The odds are stacked against a retail investor.
  
  A careful evaluation of each IPO on its merits - its fundamentals, and most importantly, valuations - is the only way to spot future multi-baggers.

To learn how to navigate the treacherous world of IPOs, HYPERLINK "https://www.equitymaster.com/5minwrapup/admin/pre-sub-ipo-get-rich.asp?email=%7bemailaddress%7d®src=1050" \t "_blank"do read our special report on finding money-spinning IPOs.

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

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