The markets were on a roll last week and the BSESENSEX hit a new lifetime high. NIFTY had done so just after the election results were declared in March 2017 for the five states. It has been making new highs ever since. Having crossed the 30k mark the markets would be relieved that Mount Everest has been crossed. Having done so there was a mild correction over the remaining two days of the week. The BSESENSEX gained 553.10 points or 1.88% to close the week at 29,918.40 points. NIFTY gained 184.65 points or 2.02% to close at 9,304.05 points.
In primary market news the issue of S Chand and Company Limited was very well received and was oversubscribed 59.49 times. The QIB portion was subscribed 44.27 times, HNI 204.65 times and Retail 6.07 times. In terms of lot wise or number of applications, the retail portion saw just over 9 lac applciations being received which translated to 5.18 times subscription. The cost of leverage for the HNI varies from Rs 131 to 157 depending upon the interest rate payable by him. This amount is based on % to 6% interest rate.
India’s first Investment Trust instrument issue opens on Wednesday the 3rd of May and closes on Friday the 5th of May. IRB Invit would be issuing through a fresh issue and an offer for sale of units worth about Rs 4,500 crs. There is a green shoe option as well which allows 25% of the over subscription to be retained. The issue bad price is Rs 100-102 and the minimum lot size is 10,000 units. Applications should be for one lot of 10,000 units and then in multiples of 5,000 units thereafter.
This instrument offers investors returns in dual form where in the initial part of the instrument there is an interest income component and also dividend income component. The interest would typically be 60% and dividend 40% which over time would change to 40% interest and 60% dividend. The expected returns for domestic institutions who get benefit on interest income is expected to be 12.4% while for individuals it would be 10%.
The company would be transferring/selling some of its operational and having residual average life of 16 years to the trust. The current toll income of these projects is roughly Rs 1,000 crs. The trust would pay out to its unit holders at least twice per year as mandated by SEBI. IRB plans to do it four times as it pays currently to its equity shareholders. The instrument is unique and would open up long term funding for long gestation infrastructure projects in road development, transmission lines, real estate and ports.
Markets are strong and they have momentum with them. Going forward there any at best be correction which would help in forming a base at higher levels. This would continue as long as there is liquidity which currently defies logic. Markets are expensive but one cannot stop them in the face of liquidity. Enjoy the rally.
