Nifty Opens at Record High; Metal & Bank Stocks Lead the Gainers

Mon, 16 Oct 09:30 am

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Asian stock markets are higher today following Wall Street's lead. The Shanghai Composite is up 0.10% while the Hang Seng is up 0.96%. The Nikkei 225 is trading up by 0.63%. US stocks rose on Friday following upbeat economic data and gains in technology shares, pushing the Dow and the S&P 500 to a fifth straight week of gains.

Back home, share markets in India have opened the day on a strong note with the Nifty hitting 10,200 level backed by Reliance Industries and bank stocks. The BSE Sensex is trading higher by 220 points while the NSE Nifty is trading higher by 57 points. The BSE Mid Cap and BSE Small Cap index both opened the day up by 0.4%.

All sectoral indices have opened the day in green with stocks from metal sector and realty sector leading the pack of gainers. The rupee is trading at 64.93 to the US$.

Telecom stocks are witnessing buying interest today with Idea Cellular share price up by 3.4% after the company approved the scheme relating to the merger of its mobile business with Vodafone India.

While, Bharti Airtel share price surged over 2% on the reports that Bharti Airtel and Millicom International Cellular, through their respective subsidiaries have completed the closure of the deal to combine their operations in Ghana.

Bank stocks have opened the day in green with ICICI Bank and DCB Bank being the most active stocks in this space. IndusInd Bank on Saturday confirmed the acquisition of microfinance firm Bharat Financial Inclusion after over a month of exclusive merger arrangement.

Reportedly, the Board of Directors of both the companies have approved a merger of the entities to create a stronger and more sustainable platform for Financial Inclusion.

According to the deal, Bharat Financial shareholders will get 639 shares of the bank for every 1,000 held. The deal is likely to be completed in 9-10 months.

Upon the Scheme becoming effective, Bharat Financial Inclusion Limited will stand merged into IndusInd and shareholders of Bharat Financial will receive shares of IndusInd in exchange for shares held by them in Bharat Financial as per the approved Fair Equity Share Exchange Ratio ("Swap Ratio").

The composite scheme, which will be effective from 1 January, is between IndusInd, BFIL and a wholly owned subsidiary of the bank. Further, the scheme will explore amalgamation of the bank with BFIL without winding up the latter company.

The merger will not only expand the balance sheet size of the bank but also increase the network of outlet. Post-merger, the new entity will have 4,000 branches and outlets and 16 million customers, the reports noted.

Notably, the Merger is expected to be value accretive from inception given Indusind Bank's lower cost of funds, ability to monetize excess PSL qualifying assets, efficient capital utilization and optimal resource utilization. Bharat Financial Inclusion Limited's distribution network also offers large untapped deposit potential from rural and underserved customers as also for their emerging banking needs.

Indusind share price fell 2.4% while, Bharat Financial Inclusion share price rose by 2.1% on the BSE.

Moving on to the news from IPO space. Godrej Agrovet has made a dalal street debut today after successfully concluding the initial public offer (IPO) last week.

The Rs 11.6 billion IPO was a huge hit and oversubscribed 95.4 times during 4-6 October. The final issue price was fixed at Rs 460 per share, at the higher end of price band.

The portion meant for qualified institutional buyers (QIBs) was oversubscribed 151 times, non-institutional investors 236 times and retail investors 7.7 times.

Meanwhile, the Rs 113.7-billion IPO of state-owned General Insurance Corporation of India was oversubscribed 1.37 times on the last day of bidding on Friday.

GIC Re's IPO received bids for 170.7 shares against the total issue size of 124.7 shares.

To know more about the both companies, you can access our IPO note on the same in our IPO section.

The IPO activity is headed for a record in 2017. In the first nine months, the volume of IPOs has already exceeded the yearly total of 2016.

However, it should be noted that the IPO activity in FY17 is mainly driven by Offer for Sale (OFS) rather than fresh issues. An OFS is a route through which existing promoters and private equity investors offload their stake.

As per Prime Database, in FY18, Rs 224.5 billion or nearly 85% of the IPO has been raised through OFS issuance. The increasing proportion of OFS can be clearly seen in the chart above.

One of the key reasons for this surge in OFS offering is due to a surge in the Indian equity market backed by liquidity and increasing investor demand for financial assets.

With several big IPOs in the pipeline in the last few months of 2017, it looks like the OFS will dominate the IPO proceedings.

The Rising proportion of OFS

During such a time, it's beneficial to be very selective when investing in IPOs. Carefully analyze each company for its own merits and don't give in to the hype surrounding the public offering.

That's Ankit Shah's approach at Equitymaster Insider. He keeps a sharp eye on the developments in the IPO space and keeps his readers up-to-date on the big-ticket IPOs.

Ankit and his team of researchers constantly reference this handbook on investing in IPOs. You can download a copy for yourself. It's free. Just click here.

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

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