Sensex Trades on a Volatile Note; Metals Stocks Drag

Mon, 5 Jun 01:30 pm

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After opening the day on a negative note, Indian share markets witnessed volatile activity and are currently trading flat. Sectoral indices are trading on a mixed note, with stocks in the consumer durables sector and the stocks in the realty sector witnessing maximum buying interest. Stocks in the IT sector and stocks in the metals sector are leading the losses.

The BSE Sensex is trading flat and the NSE Nifty is trading up by 11 points (up 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is trading up by 0.5%. The rupee is trading at 64.29 to the US$.

In news about the economy. India's services sector activity increased at its fastest pace in four months in May led by a faster rise in new business inflows, according to the Nikkei Services Purchasing Managers' Index (PMI) survey by Markit.

The Services PMI is the reading of the country's services sector output and is updated monthly. A reading above 50 indicates expansion, while any score below the mark denotes contraction.

The services PMI for May grew at its fastest pace in four months and finished at 52.2, signaling a noteworthy expansion in services sector activity.

The predominant sector of the economy expanded for a fourth consecutive month in May, higher than the 50.2 figure seen in April.

Services PMI Growth Fastest In Four Months

The Nikkei survey said the higher growth in activity was led by more business inflows based on higher demand. Businesses also hired additional staff to meet the orders.

Though input costs increased, the rate of inflation was negligible. But business sentiment weakened on the back of growing concerns regarding competitive pressures.

Having deteriorated considerably in November after notebandi, the health of India's service sector showed signs of recovery in January, with the services PMI going up to 48.5. Actual expansion however, began only from February with a slight expansion denoted by a score of 50.3.

While the services PMI has continued to expand, it is nowhere near the pre-notebandi levels of October 2016. However, a pickup in the economy after remonetisation can see the services sector expand to the previous levels.

The data comes just ahead of the second bi-monthly monetary policy on June 6 and 7.

The Reserve Bank of India in its last monetary policy review meet on April 6 had maintained the repo rate at 6.25%, but increased the reverse repo rate to 6% from 5.75%.

Moving on to news from stocks in the IPO space. According to an article in Livemint, at least four companies are set to raise money from the primary markets for the first time in June.

IPOs amounting to over Rs 50 billion are lined up for this month, with telecom equipment maker Tejas Networks Ltd, depository services firm Central Depository Services Ltd, pharma company Eris Lifesciences Ltd and small finance bank Au Small Finance Bank Ltd set to bring out their IPOs in the month.

So far this year, eight companies have raised Rs 63.5 billion through IPOs, while last year 26 companies raised Rs264.9 billion through this route.

The IPO market has been on a firm uptrend since FY15. In FY17, the amount of money raised through 25 IPOs nearly doubled to Rs 282 billion. The IPOs were well received, with a majority (15 of them) getting oversubscribed by over 10 times.

A striking feature of the IPOs that hit the market during the fiscal was that a large chunk of Rs 109.5 billion or 39% of the total amount constituted offers for sale by promoters. Offers for sale by PE and venture capital investors at Rs 42.4 billion made up 15% of the total IPO amount. This means that a little more than 45% of the funds raised through IPO were meant for deployment in the business.

After a bumper year in FY17, abundant liquidity has fueled expectations that fund raising through IPOs would remain robust in FY18. And may even surpass the amount raised in FY17. The fiscal started with 26 offerings in the first three months. In fact, India was the most active regional market in the Europe, Middle East, India and Africa (EMEIA) region as per a quarterly report by consultancy firm Ernst and Young.

With multiple offerings lined up, it becomes difficult to evaluate and pick out the best opportunity, if any exists. Not all IPOs will have fortunes like the D-Mart IPO, as the IPO game is inherently rigged against the retail investor.

We don't need to back all the IPOs to get rich. That's not how super investors make their fortunes. But a few good IPOs could certainly become the multibagger in your portfolio in a few years.

Download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

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

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