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Global market rout a huge risk for IPOs (25-08-2015)
The selloff in global markets, triggered by fears of a Chinese ‘hard landing’, poses a severe risk to India’s primary market, which is recuperating after four years of hiatus.
Merchant bankers and primary market observers said that grey market premiums saw a sharp fall on Tuesday and were reflective of the weakness in secondary markets. With the meltdown in in global markets on Monday and the prevailing uncertainty, retail investors have turned cautious and their absence may impact performance of forthcoming IPOs as it did with the Indian Oil Corp (IOC) offering on Monday.
Sources told FE the grey market premium of Power Mech Projects declined more than 60% ahead of its listing on Wednesday. The shares of Hyderabad-based power infrastructure company were quoting at a premium of R50-55 a share against Rs 150 levels late last week. The company had set a price band of Rs 615-640 for its IPO.
Navkar Corporation’s premium saw similar declines. The premium narrowed to Rs 20-25 apiece against Rs 55-60 per share last Friday. Shree Pushkar Chemicals and Pennar Engineered Building Systems (PEBS) lost the premium valuation, sources added.
Grey market is a pseudo over-the-counter market where IPO shares are bought and sold before a company officially lists on the stock exchange. It gives a broad indication of the appetite for a public issue.
Sandeep Nayak, CEO, Broking and ED, Centrum Capital, said retail investors’ participation is a function of sentiment and market behaviour and that they would not actively invest if the markets turn volatile. “We have witnessed dips in retail participation whenever markets turned volatile. For example, retail participation in June and July was down as Indian markets turned volatile,” Nayak said.
IOC’s secondary market offering by the government on Monday received a tepid response from retail investors even as they were entitled to a 5% special discount. While the offer for sale (OFS) managed to get fully subscribed, the retail book of the OFS was subscribed only 0.18 times.
The caution among retail investors comes at a crucial time as five companies — Navkar Corporation, PEBS Pennar, Prabhat Dairy, Shree Pushkar Chemicals and Fertilisers, and Sadbhav Infrastructure Project — have lined their public issues during the next 10 days. Together, these companies have the potential to raise close to Rs 2,000 crore. Ten companies have tapped primary markets so far this calendar and raised Rs 5,483.41 crore, data from Prime Database showed.
More than 60 companies scrapped their IPO plans between 2011 and early 2014 due to unfavorable market conditions, halting plans of Indian companies to raise more than Rs 65,000 crore through primary markets.
A section of the industry, however, said that the long-term state of the primary markets remains intact as India anticipates a bull-run in equity markets. Satyen Shah, EVP, Edelweiss Financial Services, said primary markets continue to be in a buoyant mood and subscriptions would depend on the nature of the issue.
“Performance of an IPO depends on the individual company, its track record and whether the pricing of the issue would leave something for the investors on the table or not,” Shah said on the sidelines of an IPO conference on Monday.
Mutual funds stand tall amid equity selloff (25-08-2015)
While equity markets were hammered on Monday amid a global selloff, mutual fund houses continued to see inflows. Asset managers are encouraging investors to put their money in balanced funds — and not pure equity funds — as markets are likely to remain unsettled over the next few months. On Monday, the Sensex plunged the most since 2009, closing at 25,741.56, down 1,624.51 points, or 5.94%.
Dinesh Kumar Khara, MD & CEO, SBI Asset Management company (AMC), said: “Despite such a sharp correction, our fund house didn’t see redemptions. In fact, we got net inflows on Monday. It shows retail investors are pumping in money whenever there is a correction in the equity market.” Tuesday saw Indian markets bounce back as they closed with gains of over 1%. Mutual fund participants are confident of seeing net inflows even in August.
In the last 15 months, equity funds have seen net inflows.
Data from the Association of Mutual Funds in India (Amfi) show MF inflows at over Rs 32,000 crore in this fiscal so far.
“I think Indian investors have understood that there was nothing wrong with the fundamentals and the fall in equity markets was mainly due to the slowdown in China. We believe retail investors will continue to put money in equity markets through mutual funds,” said Khara. Mutual fund players say flows are not only coming in from the top-15 cities, but also beyond, which is a significant success for the industry.
AUMs from beyond-15 locations grew from R1.82 lakh crore in July 2014 to Rs 2.04 lakh crore in July 2015, show data.
A marketing officer from a leading fund house said: “It was quite surprising that a few of the top fund houses got net inflows on equity side. With weak China markets and expectations of hike in interest rates in US markets, volatility will continue in Indian markets. Given such a situation, we are cautioning investors to go for balanced funds at this point of time and not go aggressively into equity funds.”
High dividend yield stocks (25-08-2015)
I think its not necessarily that dividend yield stocks cannot build capital. Obviously you cant compare them to the high growth companies but to people with a preference for lower volatility a carefully selected portfolio with decent dividend yield can give good income and also capital appreciation in future. Few things which one should consider while selecting such a portfolio is only include companies where:
a) Dividend payments can be sustained in the long term (think non cyclical business)
b) Scope for dividend increases in the future and hence avoiding companies with unsustainable payout ratios
What Stocks To Buy In Great Stock Market Crash???? (25-08-2015)
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Now I want to know whether there are any stocks worth buying according to experts. I am buying Pharma stocks because you can see in post POWER OF PHARMA !! Period (2008-2015); 7 years of WEALTH CREATION !!...
What Stocks To Buy In Great Stock Market Crash????
Aurobindo Pharma to expand product basket; eyes $3 billion revenues by FY18 (25-08-2015)
Aurobindo PharmaBSE 3.68 % is targetting a revenue of over $ 3 billion (over Rs 19,800 crores) by 2017-18 and plans to expand its basket with new drugs to treat cancer and hormonal diseases, as also with various nutraceuticals and Over The Counter (OTC) products.
Read more at:...
Aurobindo Pharma to expand product basket; eyes $3 billion revenues by FY18
Pennar & Shree Pushkar IPOs (25-08-2015)
Shree Pushkar Chemical & Fertilisers Limited IPO Today, 25th August, 2015
Pennar Engineered Building Systems
High Growth, Good Cash Flow And Better Return Ratios PEBSL (Pennar Engineered Building Systems), incorporated in FY08, is the second-largest player in a short span in the fast-growing 13-year-old PEB (pre-engineered building) industry in India. With...
Pennar & Shree Pushkar IPOs
Markets crack—what should you do? (25-08-2015)
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Lower valuations are a good point to start buying, but you don’t know what tomorrow holds. So, stagger the investment. It’s difficult to spot the bottom of the market or when the fall will stop and markets will turn around. Hence, one should continue existing investments and top up systematic investment plans (SIPs) if you can....
Markets crack—what should you do?