RBI's Operation Twist, Developments in the IPO Space, and Top Cues in Focus Today

Mon, 23 Dec Pre-Open

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Share markets in India witnessed volatile trading activity on Friday and ended on a flat note.

At the closing bell on Friday, the BSE Sensex stood higher by 8 points while the NSE Nifty closed up by 12 points. The BSE Mid Cap index ended up by 0.2%, while the BSE Small Cap index ended down by 0.1%.

Sectoral indices ended on a mixed note with stocks in the healthcare sector, automobile sector and energy sector witnessing selling pressure, while consumer durable stocks and telecom stocks witnessed buying interest.

Speaking of Indian share markets, in the video below, Rahul Shah talks about the one important chart all investors should see before making a big investment in 2020.

Top Stocks in Focus Today

From the pharma sector, Lupin share price will be in focus today as the company's alliance partner Concord Biotech has received the United States Food and Drug Administration (USFDA)'s approval for Mycophenolic Acid delayed-release tablets USP, 180 mg and 360 mg.

Mycophenolic Acid tablets are indicated for prophylaxis of organ rejection in adult patients receiving kidney transplants and in pediatric patients.

The drug had an annual sale of approximately US$174 million in the US. (IQVIA MAT September 2019).

Lupin has also launched Doxercalciferol injection, 4 mcg/2 ml (2 mcg/mL) multi-dose vials, having received an approval from the USFDA earlier.

The drug is indicated for the treatment of secondary hyperparathyroidism in adult patients with CKD on dialysis.

According to IQVIA, Doxercalciferol lnjection had an annual sale of US$132 million in October 2019.

From the finance sector, Bajaj Finance share price will also be in focus today as the company last week said it has invoked 2.4 million pledged shares of Karvy Data Management Services (KDMSL) to recover outstanding dues from a group firm.

Bajaj Finance in a regulatory filing said, "the shares of KDMSL were pledged with the company for securing the outstanding dues of Karvy Stock Broking (KSBL), the borrower company. The company has invoked the pledged shares of KDMSL for recovery of its dues."

The company invoked 2.4 million equity shares of face value of Rs 10 each representing 10% of the paid-up share capital of KDMSL.

RBI Commences India's Version of Operation Twist

The Reserve Bank of India (RBI) has commenced something that is akin to the famous "Operation Twist" conducted by the US Federal Reserve by deciding to buy the long-tenor 10-year benchmark bonds worth Rs 100 billion and selling four short-dated securities worth the same amount under open market operations (OMOs).

On Thursday, the RBI said it would be buying the 6.45% yielding notes maturing in 2029 and would be selling four papers maturing in 2020.

The OMOs would be conducted on Monday.

The step is liquidity neutral, meaning the OMOs would not be adding any further liquidity to the system that is already flush with excess liquidity to the tune of over Rs 2 trillion.

The simultaneous purchase and sale of securities would also help in flattening the steep yield curve, where long tenor yields have been high and short-term yields have been low.

For instance, despite a 60-bps reduction in the repo rate across two monetary policies in August and October, the benchmark yield remains higher by 38 basis points since August. At the same time, the system liquidity has been so high that short-tenor yields have remained fairly low. In some instances, even the 364-day treasury bill yield has gone below the repo rate, a not so usual occurrence.

During the December monetary policy when the RBI governor was asked about the possibility of an Operation Twist, he did not make any specific comments on the matter.

As per some reports, the central bank may do more of these OMO purchases/sales in coming times that will eventually bring down excess supply of long-tenor bonds in the market.

We will keep you updated on all the developments from this space. Stay tuned.

From the IPO Space...

Private equity firm Oman India Joint Investment Fund (OIJIF) has picked up a 5% stake in Prince Pipes and Fitting for Rs 1 billion in the initial public offering (IPO) of the company that concluded last week.

The PE investor, which counts Oman's sovereign wealth fund State General Reserve Fund of Oman and India's biggest lender State Bank of India as its sponsors, picked up the stake through participation in the anchor allocation one day ahead of the opening of the IPO, as well as through a secondary purchase of shares from the company's promoters.

Documents filed by the company show that OIJIF invested Rs 0.5 billion in the anchor book of Prince Pipes IPO, while it bought the remaining stake worth Rs 0.5 billion in a secondary purchase from promoters.

Prince Pipes and Fittings is one of India's leading pipe and fitting manufacturers.

It has 5% share in the organized market and was the sixth largest player in terms of sales at the end of FY19.

The fresh issue money and proceeds from the pre-IPO placement would be used for repayment of certain outstanding loans, financing the project cost towards establishment of a new manufacturing facility and upgradation of equipment at company's manufacturing facilities.

Ankit has shared a detailed note on this IPO with his readers at Insider. You can read the same here (subscription required): Prince Pipes and Fittings: Another Rs 500 Crore IPO

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