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Sensex Opens 550 Points Higher; SBI & HPCL Surge Over 6%

Thu, 5 Nov 09:30 am

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Asian share markets are trading on a firm note today. The Hang Seng is trading up by 2.5% while the Shanghai Composite is trading up by 0.9%.

In US, Wall Street's main indices moved higher, pushed by a rally in technology shares as investors absorbed the latest developments in the still-unresolved US presidential contest and nearly discarded the risk of legal challenges.

The Dow Jones Industrial Average rose 1.3% while the tech heavy Nasdaq zoomed 3.9%.

Democrat candidate Joe Biden is inching closer to the win in the US Presidential Elections 2020 even though President Donald Trump has threatened to draw out the final results by attempting to halt vote-counting in Pennsylvania and Michigan.

Back home, Indian share markets have opened the day on a strong note, tracking positive global cues.

While the US election results will remain the main trigger, investors will also keep an eye on the Supreme Court plea hearing seeking extension of loan moratorium period.

The BSE Sensex is trading up by 540 points. The NSE Nifty is trading higher by 151 points.

SBI and HCL Tech are among the top gainers today.

The BSE Mid Cap index has opened up by 0.7%. The BSE Small Cap index is trading higher by 0.8%.

All sectoral indices are trading on a positive note with stocks in the banking sector and IT sector witnessing maximum buying interest.

The rupee is trading at 74.24 against the US$.

Gold prices are trading up by 0.8% at Rs 51,219 per 10 grams.

Speaking of the current stock market scenario, note that Indian share markets have climbed back to their highest levels since the pandemic began.

The Sensex is trading above the 41,000-mark. Meanwhile, the Nifty is trading above the psychological 12,000-mark.

The smallcap index is up more than 65% since 23 March.

As per Richa Agarwal, lead smallcap analyst at Equitymaster, there could still be a lot of steam left to this smallcap rebound rally.

Have a look at the history of previous smallcap crashes and rebounds over the last two decades...

As you can see, every big fall in the smallcap index was followed by a sharp up move, a minimum gain 200%. Twice the rebounds were just shy of touching 300%.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

In latest developments from the IPO space, Hyderabad-based Gland Pharma is set to launch its maiden initial public offer (IPO) on November 9 to raise about Rs 65 billion.

The price band for the offer has been fixed at Rs 1,490-1,500 per share. The issue will close on 11 November.

The IPO, India's largest IPO in the pharma sector, comprises a fresh issue aggregating up to Rs 12.5 billion and an offer for sale of up to 34.9 million shares.

While China's Fosun Pharma Industrial Pte is offering to sell 19 million equity shares, Gland Celsus Bio Chemicals is planning to sell 10 million shares.

The other two shareholders Empower Discretionary Trust and Nilay Discretionary Trust are offloading 3.6 million and 1.8 million shares, respectively.

The company plans to utilize the fresh issue proceeds for funding incremental working capital requirements, capital expenditure requirements and for general corporate purposes.

The previous largest IPO in pharma space was Rs 17.4 billion raised by Eris Lifesciences in 2017 while Alkem Laboratories and Laurus Labs raised about Rs 13.5 billion each in 2015 and 2016, respectively.

So far in India, only 14 companies have raised over Rs 60 billion through IPOs.

So far in 2020, 11 companies have raised Rs 184.8 billion through IPOs of which SBI Cards and Payment Services alone has raised Rs 103.5 billion.

How this IPO sails through remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

Speaking of IPOs, in one of his videos, Vijay Bhambwani shares his thoughts on the recent spate of IPOs and what it means for the market.

Tune in to the video to find out more:

Moving on to stock specific news...

Hindustan Petroleum Corporation (HPCL) is among the top buzzing stocks today.

Oil refining and marketing company HPCL on Wednesday reported a two-fold jump in its September quarter net profit on the back of a surge in refining margins and inventory gains.

Net profit was Rs 24.8 billion compared to Rs 10.5 billion a year back, HPCL Chairman and Managing Director Mukesh Kumar Surana told reporters on a call.

"The significant improvement in the profitability in spite of challenges including lockdown due to Covid-19 pandemic was a result of strategic planning in refinery and marketing operation, containing the contraction to less than the industry, efficient inventory management and effective production placement," he said.

Gross sales revenue was reported at Rs 613.4 billion, which was lower than Rs 661.7 billion as compared to the previous financial year due to lower crude oil prices.

The firm earned US$ 5.11 on turning every barrel of crude oil into fuel in the second quarter of 2020-21 fiscal year as compared to a gross refining margin of US$ 2.83 a barrel.

The company also announced that its board has approved proposal to buyback up to 100 million shares, representing 6.6% of paid-up equity capital of the company, at Rs 250 per share.

The buyback price represents a 33.9% premium over HPCL's current share price.

The buyback would not involve the participation of the fuel retailer's parent company ONGC.

Speaking of buybacks, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

To know what's moving the Indian stock markets today, check out the most recent share market updates 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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