Primary markets to dominate

Markets had a poor show on Friday and the weakness pulled the markets into negative territory for the week. Friday saw losses of more than 0.75% and the gains made the previous day were wiped out. The BSESENSEX ended with losses of 59.60 points or 0.20% to close at 29,858.80 points. NIFTY lost 18.75 points or 0.20% to close at 9,285.30 points. Metal and pharma sectors were under pressure.

All the action seems to have shifted to the primary market where we saw the first INVIT issue from IRB open and close for subscription. This week we have the issue from HUDCO and the listing of S Chanda and Company on Tuesday.

The issue from IRB INVIT received excellent response and was oversubscribed 8.57 times. The issue garnered support of Rs 24,000 crs in all and as many as 62,275 applications were received. In terms of minimum lots itself the non-QIB portion is subscribed 5.46 times.

Government of India owned HUDCO is tapping the capital markets with its offer for sale of 20.40 cr shares in a price band of Rs 56-60 to raise Rs 1,142-1,224 crs. There is a discount of Rs 2 for retail shareholders and also eligible employees. Coming from the government and being in the housing space, the issue is expected to garner lot of attention and would be oversubscribed many times over.

The issue from S Chand and Company would list on Tuesday the 9th of March. The issue had received excellent response and was oversubscribed 59.49 times with HNI portion subscribed 204.65 times. This would be the first stock in the education sector which would be making money for investors in recent times. Earlier issues like C L Educate, MT Educate and even Career Point disappointed market participants.

Result season is currently on and there seems to be no clear trend emerging so far. Some results are good and some bad. While the worst is certainly over the extremely rich valuations which the market is currently enjoying needs to correct. The way that can happen is for earnings to improve or share prices to come down. Earning improvement is likely to take another one to three quarters which leaves the other option that prices need to consolidate at current levels.

I believe nothing significant would happen in markets in the near term. While liquidity would ensure that prices do not fall too sharply, any sharp rise would result in profit taking. This would ensure that markets trade in a fairly broad range allowing traders to have a field day.

Enjoy the movement and wait for sharp movements to enter or exit the market.

IRB INVIT receives excellent response – oversubscribed 8.57 times

The issue from IRB INVIT received excellent response on expected lines and finally even bettered expectations and was oversubscribed 8.57 times. It garnered support in the QIB category of 10.81 times and in the non QIB category of 5.89 times. The total response saw Rs 24,000 crs being raised. This is the first of its kind product and it took a long time in coming. It finally saw the day of light after various government bodies including the Finance Ministry, NHAI, SEBI and the ministry of roads came together.

The instrument is a hybrid instrument and is a combination of interest and dividend. The holder of units would get both streams of income with the interest component being higher at beginning and then reducing. The company is expected to distribute 90% of income to unit holders twice a year as per SEBI rules. However IRB plans to do it four times a year. This would ensure a steady flow of income to unit holders.

While the application was for 10,000 units, the trading lot would be 5,000. The returns as calculated by the company talk about 12.4% for institutional investors they talk about 10% for non-institutional investors. Even considering the tax to be paid on the interest component this would be better than the FMP products in the market and also the tax free bonds.

Bucket Size Shares Applied for Times oversubscribed
QIB 136907797 1479450000 10.81
Non QBI 114082600 671995000 5.89
Total 250990397 2151445000 8.57

While this is the first product to hit the market many more are expected in coming days and months from the transmission sector, real estate sector and commercial space owners.

Great start to a great product.

Performance of Newly Listed Shares as on 5th May 2017

Name Date of listing Issue Price closing price closing price % gain loss change over
5th May 28th April over week lssue price
Varun Beverages Limited 8th November 445.00 484.40 470.85 3.04 8.85
Sheela Foam Limited 9th December 730.00 1374.40 1292.20 11.26 88.27
Laurus Labs Limited 19th December 428.00 556.85 518.45 8.97 30.11
BSE Limited 3rd February 806.00 995.10 1004.45 -1.16 23.46
Music Broadcast Limited 17th March 333.00 349.25 349.10 0.05 4.88
Avenue Supermarts Limited 21st March 299.00 808.65 736.50 24.13 170.45
CL Educate Limited 31st March 502.00 441.45 456.55 -3.01 -12.06
Shankara Building Products Limited 5th April 460.00 704.55 703.10 0.32 53.16
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