Indian Indices End Positively, Upcoming IPOs, and Top Cues in Focus Today

Mon, 31 Dec Pre-Open

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On Friday, Indian share markets traded on a positive note throughout the day and ended on a strong note. Gains were seen in the consumer durables sector, healthcare sector and finance sector, while telecom stocks witnessed selling pressure.

At the closing bell on Friday, the BSE Sensex stood higher by 269 points (up 0.8%) and the NSE Nifty closed higher by 80 points (up 0.7%). The BSE Mid Cap index and the BSE Small Cap index ended up by 0.9%.

Top Stocks in Action Today

Tech Mahindra share price will be in focus today as the company has launched GAiA - the first enterprise edition of open source Artificial Intelligence (AI) platform Acumos.

GAiA will enable enterprises across industry verticals to build, share and rapidly deploy AI-driven services and applications to solve business critical problems.

Maruti Suzuki share price will also be in focus today as the auto company is going to launch the new Wagon R in India on January 23, 2019. Prices for the new Wagon R are expected to be between Rs 4-5 lakh.

To know more about the company, you can read Maruti Suzuki Q2FY19 Result Analysis and Maruti Suzuki Annual Report on our website.

Kansai Nerolac share price will also be in focus today as the company has entered into Share Purchase Agreement (SPA) to acquire 100% equity stake in Perma Construction Aids for a total consideration of Rs 291 million. The company is expanding its product portfolio in construction chemicals.

Market participants will also track L&T share price.

As per an article in a leading financial daily, Larsen & Toubro (L&T)'s construction arm has won orders worth Rs 23.6 billion in the domestic market.

L&T's water and effluent treatment and transportation infrastructure business has secured order worth Rs 12.8 billion from Andhra Pradesh Capital Region Development Authority (APCRDA).

To know more about the company, you can access to L&T's Q2FY19 result analysis and L&T's 2017-18 Annual Report Analysis on our website.

PSU Banks Extend Gains

Shares of public sector undertaking (PSU) banks were trading higher for the third straight day on Friday on reports that the central government would release Rs 286.15 billion before the end of this month towards a fresh tranche of funds to recapitalize state-run banks.

Canara bank, Vijaya bank, PNB, and Syndicate bank were up in the range of 2% to 4%.

Earlier this month, finance minister Arun Jaitley said that the government will infuse Rs 830 billion in public sector banks. Among various objectives, the infusion is aimed at helping better-performing banks under prompt corrective action (PCA) to come out of the category.

While the government has already infused Rs 230 billion into PSBs this year, the remaining Rs 830 billion will be provided in the remaining three months of FY19.

Reportedly, department of financial services sought Parliament's approval via second supplementary demand for grants for additional funds for banks' recapitalization, over and above the budgeted estimate of Rs 650 billion.

Earlier this year, the government pumped in Rs 113.4 billion into five PSBs, including PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank to improve their financial health.

However, using recapitalization bonds can only act as a short-term measure to the crisis afflicting Indian public-sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

• "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

From the IPO Space...

In the news from the IPO space, Antony Waste Handling Cell has filed draft papers with the markets regulator to float an initial share-sale.

The initial public offering (IPO) comprises fresh issue of equity shares aggregating up to Rs 435 million and an offer-for-sale of up to 94,42,164 stocks by the existing shareholders, according to the draft papers.

Proceeds of the issue will be utilized towards reduction of the aggregate outstanding borrowings of the company on a consolidated basis, and for general corporate purposes.

Speaking of IPO's, according to an article in The Economic Times, Indian stock exchanges ranked second globally in terms of IPOs, raising US$ 5.52 billion from 161 offerings till November this year. The US ranked first, raising US$ 60 billion from 261 IPOs.

Here's an excerpt from the article:

• According to the report, the drop in IPOs could be attributed to reasons such as significant corrections in the stock markets in mid-cap and small-cap stocks.
  
  Further, the amount of volatility has increased due to uncertainties around global growth compounded by the ongoing US-China trade wars.
  
  In addition, there are a number of macroeconomic factors which are contributing uncertainties such as liquidity crises among non-bank lenders in India triggered by defaults done by a leading infrastructure finance company IL&FS and currency volatility (depreciation of the rupee), the report added.

With so many IPOs set to hit the markets, we at Equitymaster believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs.

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.

To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.

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

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