ARSS and Jubilant outshine in 2010 while Edserv Softsystems and Mahindra Holidays, listed in 2009, are still on a rollercoaster ride
The year 2010 has seen a spate of IPOs from companies trying to cash in on the booming stock markets and more than 20 companies have filed their red herring prospectuses with market regulator Securities and Exchange Board of India (SEBI). While some of them have burnt investors’ fingers, others have something to cheer about. As on 16 April 2010, 27 companies have entered the market this year including follow-on public offers (FPOs) from public sector utilities NTPC Ltd and Rural Electrification Corporation Ltd (REC). Among them, 16 stocks have left something on the table for investors when compared to their issue price while 11 stocks are in a freefall. From these, the top 10 performing stocks have gained an average of 56.42%.
Two IPOs have yielded more than 100% returns. These are ARSS Infrastructure Projects Limited and Jubilant Foodworks Ltd, which jumped 158% and 119% from their issue price. ARSS was issued at Rs450 while Jubilant was issued at Rs145.
Aqua Logistics Ltd (73%), Birla Shloka Edutech Ltd (41%), DQ Entertainment (International) Ltd (32.19%), Man Infraconstruction Ltd (27.78%) and JSW Energy Ltd (27.74%) are trading well above their offer price, as well.
In the year 2009, 18 IPOs hit the market. Out of them, eight stocks are trading below their issue price while the balance 10 are trading above their offer price.
Edserv Softsystems Ltd, which debuted on 2 March 2009 at Rs60, has shot up 249% at Rs209.10 as on 6 May 2010. Interestingly, the Edserv IPO was graded 1/5 by ratings agency CARE.
Mahindra Holidays and Resorts India Ltd, which was listed on 16 July 2009 at an issue price of Rs300, is up 58%. It closed at Rs473.05 in yesterday’s trading session. Cox & Kings (India) Ltd has also given a decent return of 42% from its offer price of Rs330; it closed at Rs468.15 yesterday. Similarly, Pipavav Shipyard Ltd has surged 41% at Rs81.95 from its offer price of Rs58. The BSE Sensex is up by 95% since March 2009.
Rishabhdev Technocable Ltd has disappointed investors the most as it dived 73% from its offer price of Rs33. The stock closed at Rs8.81 on the BSE today. Euro Multivision Ltd (-66%), Raj Oil Mills Ltd (-50.33%), Excel Infoways Ltd (-43%), Astec LifeSciences Ltd (-31%) and Indiabulls Power Ltd (-33%) have slipped from their offer prices of Rs75, Rs120, Rs85, Rs82, and Rs45, respectively.
International cues will continue to weigh on local bourses, but expect a rally on Monday
The market was down taking cues from the global markets; however, gains in the Reliance Industries (RIL) stock limited the plunge. The BSE Sensex was down at 16,769, lower by 218 points while the Nifty was down at 5,018, lower by 72 points. The bourses started the day with a sharp plunge. They were highly volatile in the morning session on the swing of the RIL shares when the verdict of the Supreme Court was going on. The market rebounded in the early afternoon session and traded in a narrow range for the rest of the day.
Asian shares were down in choppy trade taking cues from Wall Street’s closing on Thursday and on concerns that Greece's debt problems could spill over to other weaker European countries. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by 0.16% to 3.1%. US stocks plunged 9% in the last two hours of trading on Thursday before paring some of the losses, as a suspected trading glitch and concerns over the credit crunch in Europe bogged down markets. The Dow suffered its biggest ever intraday drop of 998 points.
The massive intraday slide was rumoured to have been caused by erroneous trades reflecting the value of some shares to nearly zero. The Dow dropped 347.8 points, (3.2%) to 10,520 at close of trade. The S&P 500 fell 37.75 points, (3.2%) to 1,128. The Nasdaq lost 82.6 points, (3.4%) to 2,319. The European Central Bank will hold a conference call with commercial banks later on Friday to gather opinion on the state of money markets in the wake of the Greece debt crisis. Interbank lending rates are rising over the recent weeks on the intensification of the crisis despite the ECB's recent promise to provide banks with unlimited liquidity until at least mid-October.
Closer home, exports were down 4.7% in FY 2009-10 on the back of the global economic slowdown. However, India is targeting an export growth of 15% in the current fiscal. Aided by government help and the low base effect, India’s exports have been in the positive zone in the last five months after a straight 13-month decline.
Foreign Institutional Investors (FIIs) were net sellers yesterday offloading stocks worth Rs937 crore. On the other hand, Domestic Institutional Investors (DIIs) were net buyers purchasing stocks worth Rs379 crore. The rupee recovered in the afternoon, trading in line with some recovery in the equity market and the dollar’s loss.
A three-member Supreme Court bench headed by Chief Justice of India K G Balakrishnan ruled in favour of Reliance Industries by 2:1. Supreme Court judge P Sathasivam declared that the brothers' Memorandum of Understanding (MoU) was not binding and that RIL and Reliance Natural Resources (RNRL) must renegotiate the MoU in six weeks. Justice B Sudarshan Reddy then delivered the dissent to Justice Sathasivam's verdict. At the end of both verdicts, the Supreme Court ruled in favour of RIL by 2:1. RNRL plunged 22.9% after the verdict while RIL was up 2.4%.
Ramco Systems (down 5%) has received an order for its human capital management (HCM) and payroll management solutions from Dubai-based Tradeline LLC, a trading and manufacturing group.
Crude was down as concerns over the Greece debt crisis and the weakness in the global equity markets dragged oil prices down.
Hindustan Copper (down 6.9%) was on a rally yesterday on the news that the company will come up with a follow-on public offer (FPO). However, it pared its gains today.
Realty stocks extended recent losses on fears that the Reserve Bank of India (RBI) may resort to further monetary tightening to counter soaring inflation.
Uncertainties about sovereign debt and exchange rates have made global ‘fund of funds’ an unviable investment alternative
In one of their clever marketing tricks, fund companies have been suggesting that you should invest in global funds, offering investors the chance for allocating their nest-egg across different geographies. The idea of course is to gather more assets, under the garb of offering you diversification. How many of these funds actually understood the risk underlying such a product? Our guess is very few.
Many things have happened in the western markets in the past few weeks – Goldman Sachs’ alleged civil fraud, Greece’s debt troubles, Icelandic volcanoes and what not. After a period of relative calm and serenity, western markets have again been hit by financial woes. Exchange rates have gone haywire and stock markets have lost sheen. Concerns over Greece’s debt are being shadowed by vulnerabilities in Portugal, Spain and Italy. In such a scenario, would investors be comfortable investing in a fund that invests in global fund offerings? Right time to take a look at how global funds have been doing.
Moneylife has previously written how these funds are mere gimmicks; our advice being - stay away from these funds. First, most of these global funds have exhibited severe underperformance with average returns. For instance, the Principal Global Opportunities Fund has provided a one-year return of 23.36%, when most Indian indices have been up 80%. The Sundaram BNP Paribas Global Advantage Fund has returned just 24.70%. Similarly, the DWS Global Thematic Offshore Fund has returned a paltry 14.82%. The list goes on.
Funds that put your money in other countries presumably offer another round of diversification. That also means you are exposed to all kinds of risks unique to different countries, plagued with their own set of problems. Most shockingly, you cannot even compare how these funds have done vis-à-vis a benchmark. Global funds are pure fads. When the commodity markets are shooting up, fund companies will launch commodity-focused equity funds. When the Chinese market is hot, they will launch a China fund.
Take for example, the Franklin Asian Equity Fund, launched in December 2007, when the Asian markets were hot property among fund managers, what with the abundance of decoupling and other hackneyed theories. Since inception, the fund has given a return of -1.32%.