Fund raising by listed companies from institutional investors plunged by 38 per cent to Rs 12,658 crore in the first six months of the current fiscal. (Photo: Reuters)

Fund raising by listed companies from institutional investors plunged by 38 per cent to Rs 12,658 crore in the first six months of the current fiscal.

The funds have been raised for expansion, refinancing of debt and to meet working capital requirements.

According to the data available with the Securities and Exchange Board of India (Sebi), Indian firms garnered Rs 12,658 crore via qualified institutional placement (QIP) route during April-September 2015-16, lower than Rs 20,329 crore mopped-up in the same period of 2014-15.

In terms of numbers, 18 issues were witnessed during the period under review as compared to 23 in the first half of last fiscal.

In the entire 2014-15, a total of Rs 29,102 crore was mopped up through 51 issues.

Market experts attributed the slump in fund raising through QIP route to volatile equity markets. QIP is an alternative mode of resource raising available for listed companies to raise funds from domestic market.

In a QIP, a listed entity issues equity shares, fully and partly convertible debentures, or other securities that are convertible to equity shares to institutional investors.

In September, firms raked in Rs 4,338 crore through the QIP route, while Rs 231 crore was mobilised in August, Rs 4,824 in July, Rs 1,507 crore in June, Rs 726 crore in May and Rs 1,032 crore in April.

Unlike Samvat 2071, the expectations are pretty moderate for Samvat 2072 though the macro environment is much better now. (Express photo by Heena Khandelwal)

Samvat 2072 started on a firm note as the markets snapped their five days losing streak with both the major bourses posting gains of around half a per cent in the Muhurat Trading session on Wednesday. Not only the bluechips but the broader markets too showed the jubilation and outperformed the benchmarks. The BSE Sensex and NSE Nifty closed 0.48 per cent and 0.54 per cent up at 25,866.95 and 7,825, respectively, on Wednesday. BSE Sensex rose for the 9th time in last 11 Muhurat trading sessions.

The BSE Midcap index and the BSE Smallcap index gained 1.05 per cent and 1.48 per cent at 10,801.24 and 11,211.18, respectively.

Dipen Shah, senior vice-president and head of private client group research, Kotak Securities, said, “Samvat 2072 started off on a positive note on Wednesday, partly buoyed by the announcements related to increase in the FDI limit announced by the Government on Tuesday. Going ahead, in Samvat 2072, we expect fiscal reforms to gather momentum. Important legislations, especially GST, are expected to be passed, even if in a diluted form. Inflation has come off over the past few months and, we believe it will continue to trend lower. This opens up the window for more rate cuts in FY17.”

In Samvat 2071, the hopes of a fast recovery in economy and corporate earnings have fallen short of expectations. Critical reforms are stuck in a political logjam and the pace of recovery in economy is anaemic despite the majority mandate in the general election at the centre and the favourable impact of the softening of commodity prices. Having said this, the government has done its bit in terms of pushing policy changes that do not require legislative nod, like coal mine auctions, restructuring of the power distribution companies and deregulation of prices of petroleum products.

Unlike Samvat 2071, the expectations are pretty moderate for Samvat 2072 though the macro environment is much better now. According to Sharekhan, the twin deficits (current account deficit and fiscal deficit) and inflation are under control. The impact of policy rate cuts of 125 basis points (BPS) by the Reserve Bank of India (RBI) would begin to reflect on demand and corporate earnings. Moreover, the possible passage of some critical pending bills in the forthcoming winter session of the Parliament could provide the necessary boost to sentiment. Consequently, we retain our positive stance on equities.”

The brokerage house believes that it would be prudent to turn more selective in defensive sectors, information technology (IT) services and pharmaceuticals (pharma). The best performing pockets could be financials and urban consumption companies. Lastly, it is likely that mid-caps and bottom-up stories may outperform the Sensex and the Nifty in this year also.

Indian equity markets are going though intense volatility; however, funds with a ‘focused’ strategy have fared better than pure diversified equity funds. Apart from focused funds, even value funds have delivered better returns as markets moved sideways.

In the last one year, funds like Motilal Oswal MOSt Focused Midcap 30 and Motilal Oswal MOSt Focused Multicap 35 have given returns of 24.70% and 23.59% in the last one year. Other funds like Birla Sun Life Special Situations Fund and PPFAS Long Term Value Fund has given return of 13.47% and 13.33%, respectively, in the last one year. On the other hand, broader indices have given negative returns in the range of 6-7 % in the last one year. Market participants say that both focused and value strategies need superior stock selection to deliver strong returns. “In such funds, the portfolio consists of limited stock and if the call goes wrong, returns will take a huge beating. In the past also we have seen that such kind of strategies work best during the uneven market conditions,” said a fund manager from a leading fund house.

In focused funds, fund managers typically invest in concentrated portfolios of equity of up to 25-30 companies with superior growth potential across all market capitalisation and sectors. The main objectives of such funds is to identify businesses with superior growth prospects and strong management, available at reasonable valuation. Many funds also adopt a mix of the bottom-up approach (for stock selection) and the top-down approach (for sector allocation).

Taher Badshah, senior vice-president and co-head of equities at Motilal Oswal AMC, says, “We have always believe in focused strategy. As an investment process, we follow (QGLP), which essentially means that quality of business, growth in earnings, longevity of competitive advantage and last is price, where we buy good business for fair price. For us, this strategy has worked across the market cycle.”

Though such ‘concentrated’ strategies works effectively during the volatile phase, fund managers believe that this kind of strategy also helps deliver better returns during a bull market. “In 2014, many funds delivered huge returns but in the last few months, they are lagging in their performance, largely due to the poor stock selection. But we always invest in high-quality companies that can generate superior returns over the longer time frame in both bull as well as bear markets,” said the CEO of a top fund house.

Doing better
* As Indian equity markets  go though intense volatility, funds with a focused strategy have fared better than pure diversified equity funds
* In focused funds, fund managers typically invest in concentrated portfolios of equity of up to 25-30 companies with superior growth potential across all market capitalisation and sectors
* Value funds have also delivered better returns as markets moved sideways
* Market participants say that both focused and value strategies need superior stock selection to deliver strong returns

The biggest challenge for the market is market itself as the valuation tends to overshoot the expectations in the short to medium term and then correct. (Photo: PTI)

One shouldn’t get into equity without longer perspective tells Saibal Ghosh, chief investment (CIO) and business development officer, AEGON Religare Life Insurance to The Financial Express online. He further suggested to go overweight on demand aggregators like banks, cement and auto companies, especially commercial vehicles. Excerpts from the interview

Q. How do you see Samvat 2071 for equity investors? What is your expectation from Samvat 2072?

Ans. I would not like to confine my view on market for such narrow duration of time at a crucial juncture such as this. Notwithstanding the jittery sentiment that the market is currently going through very seldom it has so occurred that so many positive things are happening for the country at the same time. The commodity and oil for which India is a net importer are on a secular fall, inflation is softening, rates are falling, corporate margins have started bottoming out for last two quarters, twin deficits are well under check, Foreign Exchange reserve is at its peak, rupee has been stable and decoupled from the fragile five, the Government is at center despite the recent disappointment in state election is not facing any major political risk, and we can continue counting many more. But does it all mean that the market is facing no challenge? Of course there are challenges in short to medium term and there always will be some challenge or the other. The biggest challenge for the market is market itself as the valuation tends to overshoot the expectations in the short to medium term and then correct. But we as long term investors need to recognize a cycle and design the portfolio accordingly. This is clearly a cycle to construct a portfolio to earn good return from the equity market.

Q. What advice would you like to give to equity investors in the present market scenario? Suggest some sectors with reasons which can give positive return to investors in Samvat 2072?

A. I said that this is a cycle where one has to be constructive on the portfolio and design it to make more money than losing less money. And, obviously in a cycle such as this, one has to be overweight on the sectors and stocks that will be most benefiting from turning around of the economy. My advice would be to go overweight on demand aggregators like banks, cement and auto companies, especially Commercial Vehicles. However I must warn here that the market will be extremely volatile going forward till we see traction in the earnings. Therefore, one has to be careful in allocating his/her fund in equity. If one has identified the fund that he or she will not require in next 3-5 years then only that much fund should be invested in equity market. But once such fund is committed then one has to be patient through the volatility. And again my advice would be that do not try to time the market as any time is good time as long as it is for long time.

Q. What is your take on present market valuation? How much upside do you expect from benchmark indices till next Diwali?

A. From the perspective of FY17 earnings growth expectations, the market at the current level is not cheap. I also see some risk in missing the FY17 earnings estimate as infrastructure led GDP growth will take longer time to bring traction in corporate earnings. However, I would not like to confine my view from such narrow perspective in a cycle such as this as in that case we run the risk of missing the woods for the trees.

Q. What are the triggers which can give direction to markets from here onwards?

A. I do not know about the short-term triggers. But over a period of time market will gain confidence when it sees the benefits of various reforms that have taken place so far are bringing in growth in corporate earnings. While there are disappointments in delay of GST bill or Land reform but what we tend to forget is that we have also achieved a great deal in last 16/17 months. FDI increased in Railways, defence, insurance and Oil sector reforms will go a long way in boosting the economy. Many pragmatic proposals have been moved on Apprentice Act, Factories Act and Labor laws to improve the ease of doing business. The Mines and Mineral Bills will improve the logjam in that sector. The coal mines amendment bill will help resolve the long pending auction and allocation issues in this sector. And an ambitious plan has been drawn to spend $240 billion in next 5 years in Port, Railways and Road sector. The benefit of these will not come overnight but will unfold gradually over a long period.

Q. If you are building a portfolio then how much weightage do you give to other asset classes such as equities, gold, fixed income and others?

A. One shouldn’t get into equity without longer perspective. Therefore, one has to carefully allocate the fund in equity after assessing his future cash flow requirement. The thumb-rule says that one should not allocate more than (100 minus one’s age) % of his investible fund in equity. This rule is based more on common sense than any scientific logic. As you age your risk taking ability goes down and therefore you should take out money from riskier assets & allocate it to lower risk assets like fixed income.

Q. How do you see gold and silver as an investment options over equities in Samvat 2072?

A. I would avoid any kind of metals at the current juncture.

Q. What is you expectation from foreign institutional investors? Can we expect strong money inflow from FIIs in Samvat 2072?

A. We are hearing that there have been redemptions in the emerging market and Asia Pacific funds in the recent month. And this will continue if the fed rate hike happens and dollar remains strong. Therefore, if the overall size of these funds comes down then no matter whether the Fund Managers remain overweight on India the incremental buying from the FIIs will come down. We are also hearing that some of the Pension funds are selling while the sovereign funds remain invested in India. However, this is more than compensated by the Domestic Institutions flow, particularly from Mutual funds buying as the household savings in the economy have again stared shifting back to financial savings. One estimate says that the annual buying of DIIs could be around US20 billion. And these flows will be much more sticky (than FIIs flow) in nature and will help in better distribution of equity holding which is good for the market. So I am not particularly worried about the flows.

Q. The midcap and small-cap indices have been outperforming benchmark indices for the second year in a row. How do you see next 12 months for mid and small cap funds.

A. Some bit of midcap should be a part of one’s portfolio as large cap stocks do not represent all the sectors in the economy. Besides some of the quality mid-caps will become a large cap at the end of the cycle like this. But one has to exercise extreme caution while allocating fund and investment in these stocks. One has to understand that the risk is highest in this category of stocks. Besides the disclosures are often inadequate and they (mid/small cap stocks) are less covered by the research houses. Therefore, it is better to leave this part of investment to the expert and invest through specialised fund houses managing mid-cap/small-cap funds rather than investing directly.

Shares of IndiGo’s parent InterGlobe Aviation made a remarkable debut on bourses, surging nearly 15 per cent, over the issue price of Rs 765 per share.

The stock listed at Rs 856, a gain of 11.89 per cent, compared with the issue price on BSE. Intra-day, it soared 17.38 per cent to Rs 898.

It finally ended 14.83 per cent higher at Rs 878.45.

On NSE, the stock zoomed 14.67 per cent to Rs 877.25 at close of trade.

Volume-wise, 50.66 lakh shares of the company changed hands at BSE and over 2 crore shares at NSE during the day.

The company commands a market valuation of Rs 31,655.52 crore, making it the biggest domestic carrier by market capitalisation.

“The stock saw value buying on listing day itself owing to its strategic low cost advantage, expansion plans in near future and market leadership (in LCC space),” said Achin Goel, Head, Wealth Management & Financial Planning, Bonanza Portfolio Ltd.

The company’s IPO, the biggest in nearly three years, had elicited robust response as the issue got subscribed 6.15 times last month.

This was the biggest IPO in the Indian market since Bharti Infratel’s over Rs 4,000-crore public offer in December 2012.

InterGlobe has raised Rs 3,008.5 crore at issue price of Rs 765 per share from its recently concluded, over-subscribed initial public offer (IPO).

The IPO, which was available for subscription from October 27-29, was in the price band of Rs 700-765 a share.

In the public offer, qualified institutional buyers (QIBs) category was over-subscribed 17.80 times while the portion for non-institutional investors saw 3.57 times subscription.

The category set aside for retail investors was subscribed 92 per cent.

“Shares of InterGlobe Aviation made a remarkable debut on the stock exchanges even as the benchmark indices lost further ground,” said Sanil Kumar, Head u2013 Sales, Geojit BNP Paribas.

IndiGo has a fleet of 98 aircraft and about 75 of them are on operating lease — a business model which has helped it lower costs.

Earlier this month, Coffee Day Enterprises, which runs Cafe Coffee Day (CCD) outlets, made a sluggish debut on the exchanges. The company is currently trading at Rs 269.10, way below its issue price of Rs 328.

In the broader market, the Sensex tumbled 378.14 points to close at 25,743.26.