Mortgage lender HDFC, which announces its June quarter results today, will be keenly watched by domestic investors
The domestic market is likely to open in the green on supportive global cues. Good economic data boosted the US markets overnight to close with gains between 0.74% and 1.36%. The optimism in the US encouraged its Asian peers to open mostly higher this morning. The European Central Bank’s interest rate by a quarter of a percentage point to 1.5% was largely factored by the markets. The SGX Nifty was up by 16 points at 5,761.50 compared to its previous close of 5,745.50.
Positive moves across the bourses globally helped the domestic market to make significant gains on Thursday. The markets overlooked the 25 basis points interest rate hike by the Chinese central bank for the third time this year and the nervousness over the euro zone debt crisis after Moody's slashed its ratings for Portugal which sparked a sell-off in peripheral bonds.
Also yesterday, the European Central Bank raised interest rates by a quarter of a percentage point to 1.5%, but the Bank of England kept its key interest rate at a record low 0.5% as worries about the lacklustre recovery outweighed any concern about above-target inflation.
The Sensex and the Nifty opened higher at 18,777 and 5,633. The indices continued to rise for the whole day, up to the intra-day high of 19,098 and 5,737 in the closing session. The indices closed at nearly two-month highs. The Sensex rose 351 points to close at 19,078 and Nifty put on 104 points to close at 5,729.
The small decline over the past three of the four trading days had given a sense that a fall might begin. But yesterday’s massive gain lifted the Nifty over the resistance of 5,690 which we mentioned in our Monday closing report. A higher high today will ensure the uptrend will continue and could see the Nifty hit 5,800.
Positive economic news helped Wall Street close higher on Thursday. A rise in private sector jobs, coupled with a fall in initial jobless claims, gave the impression that the slowdown in the economy was only temporary. Also, a rise in retail sales resulted in higher crude prices on speculations of higher demand.
Data from the Automatic Data Processing said the US economy added 157,000 private-sector jobs in June, more than analysts’ expected. Separately, the Labor Department data showed jobless claims fell by 14,000 to 418,000 last week, more than economists’ forecast for a fall to 420,000.
The Thomson Reuters Same-Store Sales Index climbed 6.5% in June, more than doubling from 3.1% in the same month last year and exceeding analyst’s estimate for a 4.9%.
Retail sales reports indicated that shoppers took advantage of discounts that retailers implemented in June. A fall in gas prices and warmer temperatures also lured consumers. Target surged 6.7%, Kohl’s jumped 7.1% Urban Outfitters climbed 6% and Limited Brands Inc advanced 2.7%.
Meanwhile, a team of US Treasury officials is exploring options to stave off default if Congress fails to raise the debt limit by 2nd August. Treasury Secretary Timothy Geithner and other officials have said there are no contingency plans if lawmakers do not give the US government the authority to borrow more money.
The Dow gained 93.47 points (0.74%) to 12,719.49. The S&P added 14 points (1.05%) 1,353.22 and the Nasdaq rose 38.64 points (1.36%) to 2,872.66. The Nasdaq’s 8.3% gain in the last eight sessions is the most for the index in two years.
Markets in Asia were trading mostly higher on improved economic data from the US. The Nikkei 225 hit a four-month high in intra-day trade, close to pre-quake levels. Shares in Hong Kong were supported by gains in materials and resources sectors.
The Shanghai Composite added 0.01%, the Hang Seng advanced 1.01%, the Jakarta Composite surged 1.19%, the Nikkei 225 gained 0.98%, the Straits Times rose 0.60% and the Taiwan Weighted was 0.46% higher. On the other hand, the KLSE Composite lost 0.11% and the Seoul Composite shed 0.03%.
Back home, a panel of ministers on Thursday approved a new Bill calling for coal miners to share a maximum 26% of their profits with local communities. The mining ministry added the draft law, which now goes to Cabinet for approval, also calls for other miners to give to local communities an amount equivalent to royalties.
The Bill proposes the profit sharing formula in a bid to smooth land acquisition, a touchy issue in the countryside, where many oppose natural resources being carted away by outsiders.
Yash Birla group company records 150% gains on listing day which comes as a surprise for an IPO that was ranked poorly
Birla Pacific Medspa, a Yash Birla group company, was today listed at a premium on the Bombay Stock Exchange, and made gains all the way through trading to close at Rs25.35, a whopping 153% up on day one.
Beginning its rise in the first hour at Rs12.50, the stock went on to climb to an intra-day high of Rs30.70, or a phenomenal 207% up. Its closing price gives it a market capitalisation of Rs284 crore.
There is no doubt that market sentiment was positive through the day, which saw the benchmark Sensex add on nearly 2%. But at a time when companies have been putting off plans for initial public offers in an uncertain economic scenario and several IPOs have been languishing, this was an astonishing debut.
Which begs the question as to whether such a price move may have been manipulated. The company is promoted by Yashovardhan Birla and one of his group companies, Birla Wellness & Healthcare.
Incorporated in 2008, Birla Pacific Medspa is a healthcare provider, set up as a joint venture between the Rs30 billion Yash Birla group of over 20 diversified companies and Pacific Healthcare, East Asia’s leading healthcare provider that has facilities in Singapore, Hong Kong and China.
Interestingly, the public issue received a poor response with the QIB portion barely subscribed (just 1.04 times), while the portion reserved for retail investors got subscribed 1.82 times. Of the total bids received, 373.93 lakh bids were received at the cut-off price. The book running lead manager for the issue was Arihant Capital Markets.
The issue, which was open from 20 June 2011 to 23 June 2011, aimed to raise Rs65.18 crore through shares priced at a face value of Rs10. Brickworks Ratings (BWR) India had assigned an IPO Grade 2 to Birla Pacific Medspa IPO, which implies 'below average fundamentals'. (BWR assigns IPO grades on a scale of 5 to 1, with 5 indicating strong fundamentals and 1 for poor fundamentals. Brickworks is among the smallest ratings agencies and is practically unknown.)
The Yash Birla group companies are not exactly hot performers and listed group firms have performed poorly over the past year compared to Sensex.
As we at Moneylife have explained before, promoters and speculators are known to make money from the IPO on listing day. Ask a smart investor the reason for the desperation to invest in an IPO and almost always the answer you will get is that s/he is aiming for the gains from flipping on listing. (Read, “How to play the IPO game”.)
The price pop that is generally associated with the listing of a stock is why investors are so attracted to an IPO. And the Birla Pacific Medspa IPO is a perfect example of this.
Almost 75% of the gains are accounted for at the time of listing. CFOs will be hard at work to dress up the financials and present a rosy picture to investors. Investment bankers will be spending countless hours managing disclosures in prospectuses and planning a marketing blitz around the issues. Promoters will be smacking their lips in anticipation. The final game is played on listing day, when they earn the rewards for all the hard work.
Whether the Birla Pacific Medspa IPO story is any different we will know in the next couple of days.