Archive for the ‘IPO’ Category

Standard Chartered IDR : “Opportunity in Crisis”

Standard Chartered IDR : “Opportunity in Crisis”

By Jagannadham Thunuguntla

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The bad market conditions are putting pressure on the ongoing IPO of Standard Chartered IDR. However, if one closely observes, there is some opportunity emerging in the Standard Chartered IDR.

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What’s the trade?

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When the price of Indian IDR was fixed, the trading price of the Standard Chartered Plc share on London Stock Exchange was trading in the range of GBP 15.5.

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However, thanks to the stabilization of the global equity markets in the past 2 to 3 trading sessions, the price of the Standard Chartered Plc on London stock exchange has reached to the tune of GBP 16.82 on Thursday closing. Hence, the Indian rupee translation of the trading price in London stock exchange works out to the equivalent price of Rs 1140. As, there is 10:1 exchange rate, the effective equivalent price of Standard Chartered Indian IDR works out to Rs 114.

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If one observes, the Standard Chartered IDR issue book is getting built at the lower end of Rs 100.

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So, the institutional investors and large HNIs can take this opportunity, by simply applying for IDRs in the Indian public issue; and shorting the share in the London stock exchange. Hence, there is a spread of Rs. 14 (that is, between Rs. 114 and Rs. 100), that is 14%.

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This trade is more fascinating, especially, on the back of the fact that recently the listing days from the closure of the issue have been reduced to 12 days from the erstwhile 22 days. So, 14% is the spread available for a trade of just 12 days.

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Further, it is appearing that the IPO book will at best get barely subscribed one time. Hence, there is no risk of oversubscription. So, whoever applies is assured of allotment. Hence, as there is no spill-over risk due to oversubscription, this trade can really work well.

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It seems there is a clear 14% opportunity in just 12 days for institutions and large HNIs.

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Even if we assume that the final issue price will be in line with the Rs 104 per IDR, as applied by the Anchor investors, still there is Rs 10 spread (that is, between Rs 114 and Rs. 104), that is to the tune of about 10%.

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The couple of assumptions that need to be highlighted are:

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(a) The IDR issue will be able to get closed successfully and will not get called off; and

(b) The currency risk is properly hedged

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Conclusion

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As this is the first ever IDR issue in India, the learning curve will be steeper for every one associated in the value chain, regarding the concept and nuances of the modus operandi. As always, the “first mover advantage” can prove to be invaluable.

Weekly Update of The Market (08th-12th February)

Hello Friends, here, we bring you the weekly overview of the Indian as well as of the Global economy and  latest global business and industry updates.

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Weekly Update of The Market (08th-12th February)

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After starting the year on a good note & Indices making fresh highs within few weeks many Asian markets have corrected between 7 to 10%.

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The global sell off over sovereign debt problems in Europe and an unexpected rise in jobless claims in US put investors on the defensive mode.

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The anxiety about sovereign debt in Greece, Portugal and Spain sparked a sell-off in the Euro & has led strength to US dollar.

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Foreign investors sell off is an outcome of dollar-carry-trade unwinding as when they borrowed the dollar was cheap & now it is recovering.

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Investors viewed the markets in year 2010 with confidence in view of recovery gaining momentum is now shaken over the debt problems, nascent economic recovery & confidence of the governments that stand behind the euro.

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Efforts of China to curb lending preventing overheating in economy also pose a risk to derail the global recovery.

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Back at home, the effect of turmoil in the international market also made government to think its strategy on ambitious disinvestment programme.

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🙂

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Lukewarm response to the NTPC, the much awaited issue managed to get subscription of just 1.2 times on its closing day.

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The maximum bid of 20.87 crore shares was put by Indian institution under the first time adopted French Auction route.

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This has challenged the finance Ministry hopes on the proceeds from disinvestments to make up the sliding revenue & rising expenditure.

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While it looks that PSU disinvestment may not yield desired results on market weakness, the 3G auction i.e. expected to garner Rs. 35,000 crore could be postponed to next fiscal year.

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🙂

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The fate of some of the IPO’s like NMDC, Satluj Jal Vidyut Nigam Ltd and Rural Electrification Corporation that are on the disinvestment agenda before March 31, looks tough to sail through, if the stock markets do not rise and big investors do not come back.

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On the contrary, Banks like Bank of Baroda & Indian Bank that were expected to raise money overseas have put now their plans on hold.

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🙂

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The good news from the external sector continued as the data showed a 9.3% annual increase in exports in December to $14.6 billion, a second consecutive month rise.

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While imports increased by 27.2% from a year earlier to $24.75 billion.

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Food inflation remained at high levels & rose to 17.56% in the week ended 23 January 2010 from 17.40% in the previous week on the back of rising pulses & potato prices.

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Markets are likely to take a closer view of the advance estimates on economic growth for the current fiscal ending March 2010 scheduled to be released on Monday.

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🙂

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In the days to come an activity in the sectors like railways, fertiliser, textiles, pharma, education, power and infrastructure may be seen on expected positive policy announcements and budgetary sops.

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It was clearly mentioned last week that world markets are going in downtrend and one should be careful in such a scenario and that one should be moving in cash.

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Now the markets have taken a very sharp fall last week due to rise in Dollar Index and fall in all asset classes.

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🙂

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The coming week might see some counter rally from lower levels.

Nifty faces resistance between 4900-5000 levels and Sensex between 16400-17000 levels.

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🙂

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If we talk about commodity markets then one can see that strengthening dollar and lack of firm global cues had pressurized commodities prices to move southward.

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Investors are selling riskier assets and putting their money in dollar as a safe haven buying.

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Debt concerns facing Greece, Portugal and Spain coupled with dollar index which is trading above the mark of 80 is most likely to compel commodities to trade lower.

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French and euro zone GDP, USD advance retail sales, USD U. of Michigan Confidence will give further direction to commodities.

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Investors should keep an eye on gold – silver ratio.

It was 58:1 few months back, now reached to 67:1 on MCX, heading towards the level of 70:1.

It is demonstrating more selling in silver.

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🙂

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Stay Tuned for More on weekly updates.

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

Moneywise…Be Wise ;)

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If you find yourself asking the question –

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Why should I Save ?

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Why should I Invest ?

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Where do I Invest ?

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Who would Guide me to take informed decision on my Investments ?

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…then look no further !

Why SMC?

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SMC Group, a leading Financial services provider in India, a vertically integrated investment solutions company, with a pan-india presence is there to guide you and provide complete investment solutions to you.

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SMC Group, having rich experience of more then two decades in financial markets, is one of the largest & most reputed investment solutions company that provides a wide range of services to its client base of more than 5, 50,000 clients with presence in more then 1500 cities.

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SMC Online, an unit of SMC Group, is one stop financial investment portal for investor’s all financial needs.

Investors can trade online in Equities, FNO, Currency Futures, Commodities, apply online for IPOs, and invest online in Mutual Funds.

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SMC is :

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a) 4th Largest broking house of India in terms of trading terminals (Source: Dun and Bradsheet, 2008)

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b) 5th largest distributor of Initial Public Offering (IPOs) in retail (Source: Prime Data Ranking)

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c) Awarded ‘Fastest Growing Retail Distribution Network in Financial Services’ (Source: Business Sphere, 2008)

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d) Recipient of ‘Major Volume Driver Award’ from BSE for last three years consecutively.

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e) Nominated among the top three in the CNBC Optimix Financial Services Award 2008 under National Level Retail Category.

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f) One of the largest Proprietary Arbitrage Desk doing risk free arbitrage in equities & commodities.

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g) Commanding turnover of more then 3% in equity market, 4% in commodity market and 10% in DGCX.

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h) Transparent and professional management.

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j) Relentless focus on investor care.

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k) World class in-house research facilities providing research support to investors.

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l) All financial products and services under one roof.

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🙂

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Next Blog we would try to read more about the other SMC’s investment products and services.

Stay Tuned for more on this 🙂

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To know more about the SMC Products and Services, click here.

Wise Money Weekly Update of The Market (Week: 25th – 29th January)

Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates..

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Wise Money Weekly Update of The Market (Week: 25th - 29th January)

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A sell-off in global stocks, disappointment from key corporate earnings like L&T, possibilities of further monetary tightening by China and US president‘s proposal to put new restrictions on big banks weighed heavily on the domestic markets.

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In the forthcoming week, domestic markets are expected to remain volatile as traders roll positions in the derivative segment from January 2010 series to February 2010 series.

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Markets will also take cue from monetary policy which is scheduled to come out on January 29.

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Though tightening is largely expected by way of Cash Reserve Ratio hike as RBI has already started the first phase of ‘exit’ in its October 2009 policy statement but there is a belief if the RBI sucks out some liquidity, it may not raise interest rates, since liquidity is excess in the system.

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The Indian food price inflation is largely due to supply constraints.

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But going ahead anticipation of decline in food price inflation & lower borrowing from government in future because of huge money raising plans through disinvestment are some of the factors that are likely to determine RBI stance on increasing policy rates.

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The widely watched wholesale price index rose an annual 7.3% in December 2009, its highest since November 2008 and accelerating from a 4.8 % rise in November 2009.

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Food prices rose 16.81 % in the 12 months to 9 January 2010, easing from nearly 20 % in early December.

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On the Global economic front, GDP of China returned to double-digit growth in the fourth quarter of 2009 at 10.7 percent, and over the full year GDP surpassed the government’s target of eight percent.

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Back at home, domestic economy, which grew at 7.9% in the September quarter, is expected to grow 6-6.5% in the December quarter.

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The World Bank has raised its forecast at 2.7% for global growth in 2010.

Moreover it has raised its forecast for US growth in 2010 to 2.5% growth, after predicting 1.8% in June.

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Japan’s gross domestic product will expand 1.3% this year, more than the 1% predicted in June.

The euro area’s economy is forecasted to grow 1%, compared with the earlier estimate of 0.5% expansion.

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🙂

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Stay Tuned for More on this..

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Note : For More Latest Industry, Stock Market and Economy News and Updates, please click here

Hello Friends, here, we bring you the weekly view of the Indian as well as of the Global markets and latest global business and industry updates.

EQUITY MARKET OVERVIEW JANUARY 2010

EQUITY MARKET OVERVIEW JANUARY 2010

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The year 2009 was an unconventional year with surprises galore.

The sharp recovery in the benchmark Sensex is evident of the same.

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The year came with some shocks and some surprises, be it Satyam opening the Pandora’s Box, government coming to the rescue through fiscal stimulus or gold touching the new highs.


With appreciation of more than 75%, 2009 calendar year emerged as the best year bringing back hope and strengthening the faith and confidence of investors.

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As we welcome the New Year, let’s have a glance at how was the sunset of 2009 with the happenings in the month of December.


The month started with not much action as the indices were little changed as every rise was seen as an opportunity to book profits as fear of rising inflation barred investors from building large positions.

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The India’s industrial output jumped 11.7% in November 2009 from a year earlier, helped by stimulus measures and robust domestic demand.


The momentum in the country’s industrial output is likely to sustain in the coming months.


The facility for Indian companies to buy back their Foreign Currency Convertible Bonds (FCCBs) under the automatic route and approval route would be discontinued from January 2010 due to the improvement in the equity market.

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The central bank said it would allow non-bank financial companies which are focused on financing infrastructure projects to borrow from overseas markets under the approval route.


During the middle of the month, profit taking pulled the key benchmark indices lower.

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The worst monsoon since 1972 and flood in some parts of the country have pushed up food prices nearly to 17.28% annually in beginning of January, while the headline inflation accelerated to 7.31% in December.


The food supplies need to be boosted to stem the price rise as the current acceleration in inflation rate is not only due to loose monetary stance.


The government towards this, has cut the open sale price of wheat, while ministers have pledged to import food items that are in short supply to boost local supplies and stem inflation.

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Dollar also showed strength and sparked fears of unwinding of dollar carry trade.

The Christmas week saw a ‘Santa Claus’ rally that took the market to 19 months’ closing high in a truncated trading week.

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Further, the latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal.

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The corporate advance tax payments for the quarter were up 44% to Rs.48300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.


The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

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Amidst all this, we had the Finance Minister‘s statement that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term.


Towards this the government can even alter the proposed draft for the direct tax code to sustain the high economic growth.

🙂


Note : For More Latest Industry, Stock Market and Economy News and Updates, please Click Here

Indian Stock Traders To Contend With Fewer Holidays in 2010 !

Indian Stock Traders To Contend With Fewer Holidays in 2010

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Indian brokerages and traders would have to contend with fewer trading holidays in 2010, going by the list of weekdays on which the markets will remain closed in 2010.

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Moreover, they would have to put in longer hours this year owing to the decision of stock exchanges to increase the trading hours.

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In comparison to 2009, when there were 19 holidays throughout the year, the projected number of public holidays in 2010 has dropped to just 11, including the first day of the year.

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As per the official of Bombay Stock Exchange (BSE), this is certainly not by design.

Eight holidays this year — including Dussehra, Guru Nanak’s birthday, Christmas, Independence Day — fall either on a Saturday or Sunday,” he said.

“It’s only that we have mentioned them on our holiday list.”

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According to SMC Capital’s Jagannadham Thunuguntla, the Securities and Exchange Board of India was already contemplating a cut in the number of holidays to align the Indian markets with other peers, where trading holidays are restricted to six-seven a year.

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“This year, coincidentally, this has fallen in place. Many festivals and events are on weekends. That’s why, if you notice, today has been declared a holiday as a consolation to us,” Thunuguntla told.

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The authorities at the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have not only increased the trading hours by 55 minutes but have also decided not to advance the opening bell this year .

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From Jan 4 onwards, trading will commence at 9 a.m., while the closing bell will ring at 3.30 p.m. in a move intended to woo foreign funds from other major Asian markets like Singapore and Hong Kong.

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India Inc Set to Raise Rs.50k Crores Through IPOs in 2010

India Inc Set to Raise Rs.50k Crores Through IPOs in 2010.

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Domestic companies seems set to get on with the huge fund raising exercise this year with plans to raise over Rs 50,000 crore via public offers, driven by the sharp recovery in the stock market.

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Almost 50 companies have already filed the draft prospectus with the market regulator, the Securities and Exchange Board of India (SEBI).

This depicts at the healthy prospect of the strong IPO market after the encouraging revival of IPO market in 2009.

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Indian companies had raised about Rs 20,000 crore through IPOs in 2009.

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Market Experts feel that fund raising can go up to Rs 50,000 crore this year since Government has already planned to sell shares in a host of public sector companies by way of IPOs and follow-on public offers (FPOs).

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Five companies aiming to raise over Rs 300 crore have already received the regulator’s clearance for the IPO, if draft prospectus filed with the SEBI is anything to go by.

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“The IPO pipeline looks strong in 2010.

Also the way the government is pushing ahead with the disinvestment plan, fund raising can go up to Rs 50,000 crore by the end of the year,” SMC Capitals Equity Head Jagannadham Thunuguntla said.

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As part of its disinvestment plans the government intends to raise over Rs 20,000 crore by way of FPOs of NMDC, SAIL, NTPC, and REC.

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Some of the prominent private companies which have their IPOs lined up, beside this, include Jindal Power, BPTP, Reliance Infratel, Emaar MGF etc;

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“Of the total IPOs that are in the pipeline, as many as 16 are from real estate sector. However, their success is a bit doubtful as the appetite for realty IPOs are currently less,” Thunuguntla added.

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Primary market fund raising in 2008 saw 30 IPOs mopping up Rs 17,000 crore, but shares of many these companies gave the investors modest-to-good returns.

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Corporate India set to prefer QIPs for Funds Raising in 2010

Corporate India set to prefer QIPs for Funds Raising in 2010

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Merchant bankers are of view that Qualified institutional placements (QIPs) are expected to still be the preferred route to raise money in 2010.

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Earlier, QIPs  had gained traction during the middle of the year but ran into valuation headwinds in the last quarter of 2009.

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In 2009, Indian companies had raised close to Rs 33,000 crore by way of 45 QIP issuances.

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Also, about 33 QIP issuances are trading above the issue price, while 12 issuances are trading below the issue price.

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2009 was the year of the QIPs.

QIPs are expected to rule the roost, as there is serious interest and appetite in the overseas markets for instruments like converts/ADRs/GDRs.

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QIP, which was introduced in May 2006, picked up momentum in 2007 and then stagnated in 2008 when the market was in a bear grip.

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Delhi-based real estate company Unitech successfully raised $325 million through a QIP in mid-April 2009.

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Later, Indiabulls Real Estate and PTC India raised Rs 2,657 crore and Rs 500 crore, respectively, through such placements.

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QIP is a private placement by which a company sells its shares to qualified institutional buyers (QIBs) on a discretionary basis with the two-week average price being the floor.

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In a QIP, unlike an IPO or PE investment, the window is shorter (four weeks) and money can be raised quickly.

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According to a study by SMC Capital, the 45 QIP issuances have resulted into a mark-to-market (MTM) return of about more than 21.60 per cent, amounting to a profit of about Rs 7,050 crore.

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Some of the QIP issuances trading significantly above the issue price are Unitech (first round of QIP issuance), Emami, Shree Renuka Sugars, HCC , United Spirits, Dewan Housing, etc.

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Those trading below the issue price are Network 18 Fincap, REI Agro, Indiabulls Financial Services, Punj Lloyd, Delta Corp.

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“The overall positive listing performance of QIPs in 2009 will encourage investors as well as Indian corporates to access this route for fund-rising in an aggressive manner,” says Jagannadham Thunuguntla, equity head, SMC Capitals.

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QIPs had hit a pause button when a large percentage of them ran into valuation headwinds, resulting in companies raising a much smaller amount than what was initially proposed.

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🙂

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FLASHBACK 2009


For India, 2009, been a great year with the return of a stable government at centre, good FII inflow, 80% increase in the Indian stock market and less terror attacks. But globally, H1N1 influenza and a series of bankruptcy by some big international giants are some events, which we never want to happen again.

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Putting behind the worst annual performance ever, Indian equities were on a roll in 2009, catapulting a key index by more than 80 percent, to close the year with one of the best gains among emerging markets.

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At closing bell Thursday, the 30-share benchmark sensitive index (Sensex) of the Bombay Stock Exchange (BSE) was ruling at 17,464.81 points with an impressive gain of 7,817.5 points, or 81.03 percent, over the previous year’s close at 9,647.31 points.

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This was the best annual performance since 1999 and was in sharp contrast to 2008, when the Sensex ended with a hefty loss of 10,639.68 points or 52.45 percent making it the third-worst performing equities index among emerging markets.

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The story was no different at the National Stock Exchange (NSE), the other major bourse in the country, where the broader 50-scrip S&P CNX Nifty gained a hefty 2,241.9 points or 75.76 percent when it closed at 5,201.05 points Thursday.

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The main factors that made key indices rise like a Phoenix was resilience of the Indian economy and impressive growth despite global slowdown that also reflected in corporate earnings and the return of the foreign institutional funds.

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According to markets watchdog, the Securities and Exchange Board of India, such overseas funds pumped about $17.46 billion into the Indian stock markets in 2009, as opposed to a net sale worth $13.135 billion for the first time in over a decade..

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‘The performance in 2009 surpassed the expectations of even the most optimistic person. There were not many places left for foreign funds to invest and India was among the few attractive destinations,’ said Jagannadham Thunuguntla, equity head at SMC Capitals.

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Even as the Sensex gained 7,817.5 points, some of the 13 sector-specific indices stood out because of their performance — the metals index appreciated the most, up 233.68 percent, while auto followed with a gain of 204.16 points..

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Similarly, the indices for information technology was up 132.78 percent, capital goods gained 104.26 percent, consumer durables rose 97.8 percent, banking gained 83.9 percent, state-run enterprises inflated 80.54 percent, power moved up by 74.3 percent.

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On the whole, the year started on a promising note with the government unveiling a second dose of fiscal stimulus to help the economy weather the adverse impact of a slowdown in the global economy — touted as the worst in eight decades.

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As a result, the Sensex rallied till Jan 6 and gained 7.13 percent in just three days of trading. But then came the confession of a multi-million dollar fraud by Satyam Computer founder B. Ramalinga Raju, triggering a 7.25 percent fall in just one session.

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Till February, the barometer index was oscillating between 9,000-odd points and 10,300-levels. But as signs of a prolonged economic recession receded the world over, Indian equities found more takers and reflected in steady rise in the index.

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By the beginning of May it was trading comfortably around the 12,000-point mark and gave a thumping welcome to the electoral victory of the Congress party-led United Progressive Alliance — that even saw suspension of trading as indices hit the upper circuit twice.

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On that eventful day of May 18, the Sensex stood at 14,284.21 points, gaining 2,110.79 points, or 17.33 percent, over the previous close, while Nifty also rose 17.3 percent, or 636.4 points, to close at 4,308.05 points.

The remaining months of the year saw a steady rise in the index with interim corrections even as events like the presentation of an industry-friendly national budget and a high growth for the economy during the second quarter boosted investor sentiments.

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Looking at individual stocks that go into the Sensex basket, the top five gainers during 2009 were Tata Motors, up 398.33 percent at Rs.792.60; Mahindra and Mahindra, up 293.23 percent at Rs.1,080.80; Sterlite Industries, up 230.45 percent at Rs.861.65; Hindalco, up 211.23 percent at Rs.160.75; and Maruti Suzuki, up 199.88 percent at Rs.1,559.65.

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Only three stocks ended lower — Bharti Airtel was down 54.02 percent at Rs.328.80; Reliance Communications was down 23.92 percent at Rs.172.90; and Reliance Industries which ended lower since the company declared a 1:1 bonus.

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Looking ahead, the markets expect some more action once the government’s divestment programme gets underway even as investors have their fingers crossed on when the Sensex will breach the magical 21,000 mark.

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So, overall, the year 2009 has been one of the most significant chapters in the stock market growth with an increase of 80% in its value. Further, we keep our spirits high on FM’s comment that Indian economy can grow at 7.75% in FY10.

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