Sensex Trades in Red; Axis Bank Tanks 8%

Wed, 18 Oct 11:30 am

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After opening the day in red, Share markets in India have traded on a volatile note and are presently trading below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the energy sector and stocks in the power sector witnessing maximum buying interest, while stocks in the banking sector are leading the losses.

The BSE Sensex is down up by 90 points (down 0.3%) and the NSE Nifty is trading down by 36 points (down 0.4%). Meanwhile, the BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.2%. The rupee is trading at 65.04 to the US$.

In news from stocks in the IPO space. MAS Financial Services made a stellar debut on the bourses today.

The Gujarat based non-banking financial company's (NBFC) shares surged as much as 46% to Rs. 670 compared to its issue price of Rs. 459.

The initial public issue (IPO) of MAS Financial Services, which ended on October 10, was subscribed a whopping 128 times with strong demand coming from non-institutional investors. The segment reserved for non-institutional investors was subscribed 378. times while the qualified institutional buyers (QIBs) portion saw subscription of 148 times. Meanwhile, the retail category was subscribed 16 times.

MAS Financial Services, which raised Rs. 2.3 crore of fresh capital through this IPO, will use it for augmenting its capital base to meet future capital requirement.

The company's business and financing products are primarily focused on middle and low-income customer segments. We had analysed and reviewed the IPO and released a recommendation note. You can check the same on the IPO page.

One space which tests the investor's contrarian philosophy is the IPO space. The demand for IPO's has reached sky-high levels. Avenue Supermarts was the first company this year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies lately, with MAS Financial Services being the newest entrant to the list.

IPO Subscription Times (2017)

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.

This allows us to stay on the fence when it comes to investing in IPOs. But it doesn't make sense to completely ignore this space. 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 created immense wealth for shareholders.

A merit-based selection primarily including valuation, business, and management quality is the logical way to go about it. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often than not.

Moving on to news from stocks in the banking sector. Axis Bank is among the top losers today after it declared tepid results for the second quarter of this fiscal year.

Axis Bank share price fell as much as 8% in the morning trade today after the company reported continuing slippages in corporate lending.

While the bank's earnings rose by as much as 35%, it was because of a lower base in the previous year and a jump in treasury profits.

Axis Bank's corporate lending continued to suffer with rising bad loans, and its retail segment profitability was dented with a fall in pre-tax profit.

Percentage of gross non-performing assets (NPA) increased to 5.9% from 5% in the sequential quarter ended June 30, 2017. Percentage of net NPAs also increased to 3.1% in Q2FY18 against 2.3% in Q1FY18.

The bank said that the slippages were elevated due to the differences in classification of assets pointed out by the RBI. Asset quality outlook depends on the trends in the corporate accounts which are rated low. Considering that such pool of loans has seen sizeable reduction, the management expects credit cost to normalise from the second half of next fiscal.

At the time of writing, Axis Bank Share price was trading down by 7.8%.

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