Sensex Opens on a Strong Note; Nifty Hits Record High

Wed, 3 Apr 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1% while the Hang Seng is up 0.8%. The Shanghai Composite is trading up by 0.3%.

Back home, India share markets have opened the day on a positive note. The BSE Sensex is trading up by 192 points while the NSE Nifty is trading up by 39 points. The BSE Mid Cap index and BSE Small Cap index both opened the day on a positive note.

Sectoral indices have opened the day on a positive note with consumer durable stocks and finance stocks witnessing maximum buying interest. While, IT stocks have opened the day in red.

The rupee is trading at Rs 68.65 against the US$.

The domestic currency opened marginally higher at Rs 68.72 against the dollar. Rupee rose against the US dollar primarily as foreign fund inflow continued in April after huge inflows in the previous month.

In the news from the aviation space, Jet Airways share price is in focus today. As per an article in The Economic Times, the debt-laden airline's domestic operations now comprise just 12-15 planes, making it the smallest operating pan-Indian carrier.

Here's an excerpt from the article:

• Jet is flying 29 planes - ten 737 NGs, seven ATR turboprops for short local routes, and a dozen wide-bodied Airbus A330s and Boeing 777s, compared with 124 planes in December. The four A330s and eight Boeing 777s are used for operating medium and long-haul international flights while the 737 NGs fly on domestic and neighboring international routes and the ATRs on short local routes. The count is expected to fall further.
  
  Indian rules say an airline must have a 20-aircraft fleet and 120 daily domestic flights to fly international. As such, Jet is undoubtedly flouting the norms.

A government official recently said Jet's curtailment of operations would be reviewed over a period of three months before taking a call. A senior executive at Jet said there was a "grandfather clause", which protected a percentage of international flying rights once an airline had proven itself eligible for such operations.

In addition to grounding a majority of its fleet, Jet defaulted on Indian and overseas loan repayments, vendor dues and salaries, and laid off people.

Banks were to release an immediate additional debt funding of Rs 15 billion for Jet to tide through and part-pay its vendors and employees. People close to the matter said the funds had not been released yet.

Jet Airways share price has opened the day down by 3.1%.

Speaking of airlines, while looking at the current demand-supply scenario in the aviation industry, it is important to look at how air passenger traffic is growing.

Have a look at the chart below that shows the air passenger growth for the past six months:

Air Passenger Growth is Tapering off

In February, domestic air passenger traffic reported its lowest monthly passenger traffic growth since January 2015. It registered a marginal annual growth of 5.6%.

Similarly, in January, the number of passengers flown by domestic airlines grew at 9.1% YoY, while in December, it increased by 13% YoY. This is way lower than the historical growth rate of 20% between 2014-2018 period.

As per Research Analyst Sarvajeet Bodas, a slowdown in passenger growth is due to several factors. These include frequent flight cancellations due to grounding of fund-starved Jet Airways' aircraft, pilot shortages faced by IndiGo, NOTAMs (notice to airmen) at various airports, and a rise in airfare etc.

In the last 5 years, we saw a surge of middle-class travelling by plane. But when the ticket price goes up, many of them prefer an alternate mode of transportation.

Moving on, in the latest developments from the IPO space, the initial public offering of Rail Vikas Nigam (RVNL) was subscribed 48%, as of yesterday. The offer closes today.

The offer has received bids for 120.4 million equity shares against offer size of 253.4 million shares (excluding anchor investors' portion).

This will be the third rail PSU to be listed after Rites share price and Ircon International share price.

Incorporated in 2003 by the Ministry of Railways, Rail Vikas Nigam Ltd (RVNL) is a wholly-owned government company, founded as a project executing agency working for and on behalf of the Ministry of Railways.

The company is in the business of executing all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable stayed bridges, institution buildings, etc.

It goes without saying that the company's key client is the Indian Railways. The other clients include various central and state government ministries, departments, and public-sector undertakings.

Ankit Shah has shared the detailed note of the IPO. You can read it here.

Speaking of IPOs, 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 IPOs, 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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