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Sensex Surges 300 Points on Exit Polls; Metal & Capital Goods Stocks Rally
Fri, 15 Dec 09:30 am

Asian indices are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 0.88% while the Hang Seng is down 1.01%. The Shanghai Composite is trading down by 0.67%. Major US stock indexes fell on Thursday, with the S&P 500 down the most in a month, as worries over potential roadblocks to the Republicans' tax overhaul more than offset optimism over strong retail sales data.

Back home, India share markets surged in the opening trade as investors cheer after the exit polls that released their survey results on Thursday evening predicted that the Bharatiya Janata Party (BJP) was set to retain Gujarat and wrest Himachal Pradesh from the Congress. The BSE Sensex is trading higher by 305 points while the NSE Nifty is trading higher by 97 points. The BSE Mid Cap index opened up by 1% while BSE Small Cap index opened the day up by 1.1%.

All sectoral indices have opened the day in green with metal stocks and capital goods stocks witnessing maximum buying interest. The rupee is trading at 64.48 to the US$.

Meanwhile, multi-specialty hospital chain Shalby which recently concluded its Rs 5 billion initial public offering, has listed its shares on NSE as well as BSE today. The IPO, which opened for subscription from 5-7 December, was subscribed 2.8 times at a price band of Rs 245-248 per share.

2017 will undoubtedly be considered as the year of IPOs. The IPO activity is headed for a record. They have garnered more than Rs 650 billion, surpassing the previous record of Rs 375 billion in 2010. This year, the demand has exceeded expectations.

However, according to an article in Business Standard, an investor who bet on the 33 IPOs of 2017 (on a weighted average basis) has seen the value of investment rise by 17%. However, compared to broad market indices, the underperformance is a bitter disappointment.

Below chart clearly shows the underperformance of IPOs.

IPOs Underperform Broad Market Indices

Interestingly, if you take the Avenue Supermarts (D-mart) and HDFC Life out of the equation from the IPOs above, the gains drop to a meager 6%. Compared to this, the Sensex has gained 27%, while the small-cap index surged more than 50%.

Thus, during such times, it is imperative to be critically selective when investing in IPOs. Carefully analyse each company for its own merits and don't give in to the hype surrounding the public offering.

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opened the day on a mixed note with Tayo Rolls and Tata Communications leading the gains. As per an article in a leading financial daily, the Tata group and General Electric Co. (GE) have signed an agreement to manufacture components for CFM International's LEAP engines in the country, which will also serve the American company's global supply chain.

The joint venture will be executed by the Tata Group aerospace arm, Tata Advanced Systems (TASL) and GE Aviation. Under the strategic partnership, GE Aviation and Tata Advanced Systems, will join forces to manufacture, assemble, integrate and test aircraft components. They will also look at opportunities to make military engine and aircraft system in the country.

The LEAP engine, which powers the next generation of single-aisle commercial jets, was developed by CFM International -- a 50-50 joint venture company between GE Aviation and Safran Aircraft Engines of France.

The CFM LEAP engine parts manufactured in India will be sourced for GE's global supply chain.

Traditionally, GE military engines have had a strong history in India. The company currently provides jet engines and marine gas turbines for many Indian military applications including the Light Combat Aircraft-Tejas Mk 1, Indian Navy P-8I aircraft and the P-17 Shivalik class frigates.

On the other hand, TASL is focused on providing integrated solutions for aerospace, defence and homeland security.

Moving on to the news from FMCG sector. ITC has rolled out its largest integrated food manufacturing and logistics facility here with the first-ever 'wheat mandi' unit to procure the grain from farmers, besides other FMCG units.

Reportedly, the facility spread across 0.8 million square feet and entailed an initial investment of Rs 15 billion. The facility, when operational, will create direct employment of over 2,000 people, besides indirect employment throughout the value chain.

The plant will manufacture ITC's popular food brands such as 'Aashirvaad', 'Bingo!', 'Sunfeast', 'YiPPee!' and 'B Natural', among others.

Further, the facility is part of the company's plans to open 20 such food processing units pan-India with an investment of Rs 100 billion.

One shall note that, ITC is investing heavily in both agriculture and food segments considering huge potential in these two sectors. The company had earlier announced investment of Rs 250 billion to enhance physical infrastructure and manufacturing capabilities.

Besides, Kapurthala, ITC has food processing facilities in West Bengal, Assam, Pune, Mysore and Bengaluru.

Moreover, the tobacco-to-hotels firm, which is focusing more on its non-tobacco businesses, aims to be an Rs 1 trillion company in the FMCG space by 2030, with the packaged foods contributing Rs 650 billion.

ITC share price opened the day up by 0.8%.

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