Posts Tagged ‘Coal India’

Weekly Update 25th – 29th October

Losses due to profit taking in the Indian markets during initial part of the week were recouped seeing the huge response for Coal India offering especially from the overseas investors. The issue attracted bids that exceeded the combined gross domestic product of Latvia and Iceland. However most of the Asian markets corrected in the week gone by after China unexpectedly raised interest rates to curb inflation and to prevent an asset price bubble in the economy on concerns over regions economic growth.

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The move indicates that the consensus has been reached for lower growth. Albeit past experience has shown that initial interest rate hikes does not give much harm to economic growth. China’s economy expanded by 9.6 percent in the third quarterless than the growth experienced in the prior quarter but higher than the median estimates of 9.5 percent.

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Results of companies from Europe to U.S. supported markets. According to Bloomberg data of the 132 companies in the S&P 500 that reported results since Oct. 7, more than 85 percent have topped analysts’ per- share earnings estimates.Whereas in Europe, of the 46 companies in the Stoxx 600 that have posted results since Oct. 7, 32 have beaten estimates for per-share income.

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The result season has so far been good in India. Banks have posted decent to strong earnings growth. In the Information technology sector TCS and Infosys surprised positively while Wipro surprised negatively. Auto companies are expected to deliver strong set of numbers on the back of higher volumes with price increase. Higher metal prices are likely to provide good earnings to manufacturer of base metals. Cement companies are likely to post bad set of numbers on the back of lower realization and good monsoon season.

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Market is eyeing over G-20 finance chiefs meet to try to resolve differences over countries that are devaluing their respective currencies in order to spur economic growth and to endorse market-based exchange rates in a fresh effort to defuse mounting trade tensions before they hurt the world economy. We may see some volatility in domestic markets on account of expiry week.

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Stock specific activity is likely to play out as the results season is still going on. Nifty has support between 5950-5870 and Sensex between 19640-19200.Good corporate earnings amid falling dollar index are offering opportunities to bulls to keep the momentum in their favour, especially in base metals. 19-commodity Reuters-Jefferies CRB index, which serves as a broad benchmark for commodities investors, was up for a ninth straight week since Aug. 22.

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Monetary tightening by China could not give much impact on base metals prices. In case of bullions, trend is little different. Bullions prices retreated across the board as dollar index grew stronger and investors opted to sell some of their holdings for aprofit. For the time being bullions should move in a range. Market players appears cautious to some extent ahead of next month’s decision from the Federal Reserve about whether to take steps to stimulate the economy. Even energy pack is moving in a range on mixed fundamentals. Bulls are more active in agricultural commodities owing to the ongoing festive fever.

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CIL sets IPO record; to list on Nov 4

India’s IPO market created history on Thursday with state-owned Coal India share issuer in the becoming the biggest country, beating Reliance Power’s 2008 initial public offering.

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At the time of going to press, the CIL issue was subscribed 15.26 times, collecting Rs 2,36,113.28 crore. The shares will debut on the market on November 4, a day before Muhurat trading that marks Diwali.

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Responding to late rush from retail investors, the company postponed the close of the issue to 9 pm.

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At the upper end of the band, CIL will be the seventh biggest Indian company by market cap, after ONGC, State Bank of India, TCS, Reliance Industries, Infosys Technologies and NTPC, based on Thursday’s closing price. CIL’s Rs 15,474 crore IPO has overtaken Reliance Power’s Rs 11,700 crore issue.

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Buoyant demand from retail and wealthy investors on the final day added to the strong response from institutional buyers. This also signalled success for the government’s upcoming share sales.

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Retail investors, who often take cues from institutions in IPOs, had put in bids for shares 1.44 times or for 28,60,44,375 shares. Retail investors will get a five per cent discount on the final issue price.

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Wealthy individuals had separately bid for 13.89 times the shares available for them.

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Bidding for the mega IPO closed on Wednesday for qualified institutional buyers, including foreign institutional investors, mutual funds and insurance firms. And for the portion reserved for them, the issue was over subscribed by 24.70 times, lead by FIIs.

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The IPO has generated a demand of 493,38,72,050 shares from FIIs. Calculated at the upper end of the price band, this demand is worth Rs 1,20,879.86 crore and at the lower end worth Rs 1,11,012.12 crore. Even at the low end, the demand surpasses the record Rs 1.08 lakh crore pumped in by FIIs into the capital
market.

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India’s largest new issue came amid a flurry of big deals in Asia.

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At the top of its price range, Coal India would be valued at 15.7 times trailing earnings. The issue also got the highest demand for an Indian issue, helped by qualified institutional buyers.

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The demand from QIBs for CIL was at Rs 1,73,398 crore with 100 per cent application amount, compared with Rs 1,88,923 crore with 10 per cent margin for Reliance Power IPO. In case of Reliance Power, the QIB portion was covered 30.68 times.

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“The response to Coal India IPO, from all classes of investors, has surpassed even the most optimistic predictions. It has caught even the biggest optimists by surprise,” SMC Global Securities strategist Jagannadham Thunuguntla said in a note.

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He said the response puts the government on target to achieve its divestment target of Rs 40,000 crore in fiscal 2011 and even exceed it if other issues like the follow-on offering of Power Grid, Steel Authority of India, ONGC, Shipping Corporation of India, Indian Oil Corporation and IPO of Manganese Ore fall in place.

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The government, which has collected Rs 17,500 crore from public issues, including Coal India, may raise its divestment target and get over Rs 58,500 crore, SMC Capital added.

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At the upper end of price range, Coal India issue is worth Rs 15,474 crore and at the lower end it would fetch about Rs 14,211.81 crore.

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The upper band would also give it a market capitalisation of Rs 1.54 lakh crore ($34.7 billion).

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Meanwhile, the broader market recovered from a two-day slump and closed up 1.95 per cent at 20,260.58 points. Now all eyes will be on whether it will be a strong listing on the eve of Diwali.

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Weekly Update 18th – 22nd October 2010

Most of the world markets rallied in the week gone by on the buzz of further quantitative easing by U.S. Without giving details about the strategies on how the central bank will act its Nov. 2-3 meeting, Federal Reserve Chairman Bernanke said additional monetary stimulus may be warranted because inflation is too low and unemployment is too high.

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Fed is considering ways for raising inflation expectations to encourage people to believe that prices will start rising at a faster pace so that they would spend more of their money now. Retail sales in U.S.climbed more than forecast as purchases rose 0.6 percent following a 0.7 percent gain in August and manufacturing in the New York region expanded in October at a faster pace than anticipated.

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China’s Shanghai Composite Index saw gains of 8.5 percent on the anticipation that China’s banks show strong earnings growth this quarter as the lending has beaten the forecast. Moreover the strong exports growth of 25.1 percent in September mirrors the strong underlying economic momentum. The country’s foreign-exchange reserves, the world’s largest, surged by a record to $2.65 trillion at the end of September.

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India’s wholesale price index rose to rose 8.62 percent in September from a year earlier after an 8.5 percent gain in August. Manufactured product inflation and Food price inflation rose by 0.3 percent and 1.6 percent respectively in September fromthe previous month. RBI Chief Subbarao said that inflation in India is being “quite stubborn,” a sign that controlling prices remains the central bank’s priority.

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Reserve Bank Deputy Governor Subir Gokarn signaled the central bank may intervene in the currency markets to shield exporters from the strengthening rupee. The capital account showed a surplus of $17.5 billion in the quarter to June 30, compared with a record shortfall of $13.7 billion in its current account.

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Foreign investors have so far poured approximately $23 billion in stocks and 10 billion indebt this year. Industrial production expanded by 5.6 percent in August after seeingan expansion of 15.2 percent in July.Going next week the main attraction for retail investors would be the primary market with Mega IPO of Coal India slated to open on 18th October. As Infosys has already rung the bell with positive surprise in terms of earning growth, the investors would now look forward to numbers of companies like L&T, HDFC, Bajaj Auto, etc that are scheduled to announce numbers next week.

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Nifty has support between5870-5950 and Sensex between 19200-19640 levels.With expecting second round of monetary easing, investors dumped dollar and endowed other investment avenues. Commodities extended a rally to the highest intwo years and CRB closed near the mark of 300. The dollar fell to its lowest in 10 months against a basket of currencies and breached the mark of 77. Five week continuous downfall enhanced metals and agricultural commodities.

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Gold gave heroic performance and made another life time high. It rose more than 25% in 2010.Silver is also trading near 30 year high. However, being prudent investors, one should book profit in gold and silver, considering safe trading. Base metals are expected to trade in a range. Crude oil should trade in range $80-85 in short run on mixed fundamental. OPEC has decided to keep the production quota unchanged in last meeting. Agro commodities should trade with high volatility ahead of expiry of October contract.

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Weekly Update 11th – 15th October 2010

Beside Indian market all global markets closed in green in the week gone by on the expectation of policy easing by developed nations. Central banks resorting to purchase of debt and currency intervention in developedeconomies is flooding markets with liquidity and funds are flowing to Asia for higherreturns. Fed Chairman Ben S. Bernanke has signaled that Fed may announce thepurchase of more Treasuries as soon as their next policy meeting in November in aneffort to boost growth and reduce an unemployment rate.

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The Bank of Japan said this week it will establish a 5 trillion yen ($61 billion) fund to buy government bondsand other assets. It also cut its benchmark overnight interest rate for the first timesince 2008, dropping it to a range of zero to 0.1 percent. Joining the league European Central Bank President Jean- Claude Trichet too said that ECB policymakers are in the “same mood” as a month ago and for now remain committed tophasing out their unlimited lending program.With the economic activity gaining pace, it is believed that Indian market wouldcontinue to see overseas buying. Moreover Indian government plans to raise $8.9billion in the year ending March 31 selling state assets including Coal India, Steel Authority of India Ltd. and Indian Oil Corp. thereby giving more investment opportunities to investors.

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While many developed nations are intervening in the currency markets in order tostem the appreciation in the currency, Indian Finance minister is of the opinion thatthe situation has not gone to an extent at which there is a need to restrict portfolio or foreign direct investment. As a matter of fact Indian rupee gained 4.5 percent inSeptember. Finance Minister said “We should try to engage the countries innegotiations and build up a consensus through which the matter can be resolved andit cannot be resolved through confrontation.” The International Monetary Fundraised its 2010 economic growth forecast for India to 9.7 percent from 9.4 percent,citing strengthening local consumer demand.

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Since we have already seen a huge run up in the broader indices meaning moreparticipation coming from large cap stocks so now going forward we may expectmore activity in mid and small cap stocks. The result season is starting in the comingweek and corporate would give their guidance for the rest of the year which wouldset the future undertone of the markets. Nifty has support between 5950-5870 and Sensex between 19640-19200 levels.What a stunning rally gold has enjoyed recently on fear of inflation. It has hit many records in fewer days.

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Silver was not behind, it made life time high of `34898 on MCX and breached the mark of `35000 in spot market. Talk of quantitative easing by US and rate cut by BoJ are creating anxiety over currency devaluation and long-terminflation is keeping gold and silver on remarkable run up. After witnessing the bigswings of both side, we can say that trend of crude oil is little bit in indecision mode.However, bias should be on upside. Michigan Confidence, CPI and advance retailsales data of US may further provide the direction to metals and energy. Industrialmetals which have made upper trading range last week, are likely to trade up onweakening dollar index.

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SEBI’s Auction Move on FPOs Impresses Marketmen :)

 

SEBI's Auction Move on FPOs Impresses Marketmen

SEBI's Auction Move on FPOs Impresses Marketmen

SEBI’s has planned to remove the cap price for the follow-on public offerings and this idea seems to be impressing market players.

SEBI has said that  it would introduce “pure auction as an additional book building mechanism for institutional investors for follow-on public offerings (FPOs).”

Analysts and market men feel that this is going to generate loads of excitement and fun for market players, as those investors who are convinced about a particular issue will invest at a higher price to seek allotment and those not-so-convinced can invest at a lower price.

Merchant bankers said it will be interesting to see how this will work as there are a few PSU FPOs likely to hit the market soon.

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PSUs likely to come out with FPOs include NMDC, MMTC, Neyveli Lignite Corporation, Rashtriya Chemicals and Fertilizers, National Fertilizers, Coal India and Engineers India

As of now, the IPO price is determined through a price band (which has a lower and upper level).

An auction or floor price is the minimum price at which bids can be made for an IPO.

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Meanwhile, merchant bankers welcomed SEBI’s announcement on Monday that exchanges could have a separate platform for Small and Medium Enterprises (SME).

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As the primary market size grows, the smaller companies are getting lost amid the big ticket IPOs.
Having such exclusive guidelines for SMEs is definitely a good idea, said merchant bankers.

SME platform SEBI on the lines of the AIM on the London Stock Exchange will be better.

Those SMEs with a paid-up capital of between Rs 10 crore and Rs 25 crore have an option of either being on the SME exchange or the main bourses.

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According to the new guidelines, SMEs should have a maximum paid up capital of Rs 25 crore for listing.

For an investor the minimum application size in an SME IPO will now be Rs 1 lakh.

Though such a limit might seem like it will prevent the retail investor of small means from investing in SME IPOs, merchant bankers said that it is a good move.

“This will allow retail investors to take more informed decisions. It will protect these investors as the chances of manipulation with respect to smaller companies are much higher. Those investors with the right amount of knowledge and liquidity will be the ones investing in these IPOs,” said Mr Jagannadham Thunuguntla, Head of Equity at SMC Capital.

Having the merchant bankers underwriting the IPO will make sure that they price the issue properly and also provide proper valuations.

Merchant bankers are also happy that for an SME issue the minimum number of investors is only 50 for a particular issue.

“For an issue, as of now, there has to be a minimum of 1,000 investors,” said Mr Thunuguntla.