Sensex Opens Higher on GDP Boost; Realty & Automobile Stocks Gain the Most

Fri, 1 Dec 09:30 am

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Asian stock markets are trading mixed today. The Shanghai Composite is lower by 0.20% while the Hang Seng and Nikkei 225 is trading flat. On the Wall Street, Thursday session closed with huge gains as the Dow Jones Industrial Average crossed the 24,000 landmark for the first time and the S&P 500 also reached new record closing highs.

Back home, India share markets have opened the day on a firm note after India's GDP growth quickened to 6.3% in the September quarter, up from a three-year low of 5.7% in the June quarter. The BSE Sensex is trading higher by 115 points while the NSE Nifty is trading higher by 32 points. The BSE Mid Cap index and BSE Small Cap index opened the day up by 0.8% & 0.7% respectively.

All sectoral indices have opened the day in green with automobiles sector, realty sector and healthcare sector witnessing maximum buying interest. The rupee is trading at 64.43 to the US$.

In news from the IPO space. As per an article in a leading financial daily, Housing Development Finance Corporation Ltd (HDFC) has initiated the process to list its mutual fund arm, and the parent firm will divest a part of its holding in the initial public offering (IPO).

HDFC's holding in HDFC Asset Management Co Ltd following the IPO will be at least 50.01%. Its joint venture partner, UK-based Standard Life Investments, will hold at least 24.99%.

HDFC's ownership in its mutual fund arm stood at 57.36% at the end of September 2017, compared with 59.99% at the end of fiscal 2016-17.

One shall note that, HDFC AMC will be India's second mutual fund to go public. Reliance Nippon Asset Management Co, India's third-largest mutual fund, went public last month through a Rs 15.4 billion (US$238 million) IPO that was subscribed 81 times at close.

To know more about the Reliance Nippon, you can read our IPO note on the company in our IPO section.

According to data from Association of Mutual Funds in India (AMFI), HDFC AMC is the country's second-largest mutual fund, with nearly Rs 2.7 trillion in assets under management (AUM) as on September 2017. ICICI Prudential Mutual Fund is India's largest AMC, with an AUM of Rs 2.8 trillion.

Also, HDFC AMC will be the fourth firm under the HDFC brand to go public, with HDFC Standard Life Insurance Co hitting capital markets earlier this month, 22 years after the group first approached capital markets.

To learn how to navigate the treacherous world of IPOs, do read our special report on finding money-spinning IPOs.

With buoyant capital markets and the mutual fund industry on a roll, asset management companies are eager to unlock value through initial public offerings. And the first mover in this race is Anil Ambani promoted Reliance Nippon Life Asset Management Company.

However, India has the lowest mutual fund penetration globally. The total Assets under Management (AUM) to GDP ratio of India stands at a mere 10%, way below the global average of 55%. Countries like Australia and the US have AUM to GDP ratios of over 100%. So, the mutual fund industry in the country provides huge scope for growth and development.

India Fares Poorly in Mutual Fund Penetration

Real estate and gold have become less attractive forms of investments post notebandi. Even the reduction in bank deposit rates in the past year has led to a shift in investment to mutual funds and the stock markets.

The mutual fund industry has grown at an annual rate of 18% in the past decade, and is expected to grow by 20% over the next five years.

HDFC share price opened the day on a flat note.

Moving on to the news from Pharma sector. As per an article in a leading financial daily, German regulatory authority has allowed Dr Reddy's Laboratories' Visakhapatnam-based plant to restart production for the European Union market.

Reportedly, the corrective and preventive action plan (CAPA) submitted by company was accepted by the regulator. Consequently, the regulator permitted production to start again from this facility for the EU market. However, the regulator will re-inspect the facility by the end of 2018.

In September, a German regulatory authority had issued six major observations against the Hyderabad-based drug firm's formulations unit at Visakhapatnam in Andhra Pradesh after an inspection.

The company, however, did not elaborate on the observations which were made by the regulator related to violation of good manufacturing practises (GMP).

Dr. Reddy's Lab share price opened up by 0.5%.

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