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MSCI Rejig: What it Means and How it Will Impact Flows

MSCI
13/08/2021

For global passive investors like index funds and ETFs, the MSCI index has long been a benchmark for allocation. Hence, any changes in the index composition results in buying or selling of stocks depending on whether their weights in the index increase or reduce. 

The MSCI (Morgan Stanley Capital International) does a semi quarterly review every August. In the latest review done on 11th August, there has been no additions or deletions of stocks in the Indian indices. However, there is still likely to be a reduction in weight. Here is why.

In the emerging markets (EM) index, India and China are key participants. Even if there is no change in the India portfolio, a sharp increase in the China allocation would automatically reduce the India allocation on a relative basis.

In the August 2021 quarterly China review by MSCI, there have been 18 additions and 7 deletions to the MSCI, China-A Onshore Index. In addition, there are 23 additions and 2 deletions to the MSCI China All-Shares index. The net result is that the weight of China in the MSCI EM index will go up and that of India will reduce.

 

 

It is estimated that this shift will result in $160 million (Rs.1,200 crore) worth of selling in major Indian stocks. For instance, blue chips with a high weightage like RIL, Infosys and HDFC will be among the stock to see heavy selling. 

However, there are stocks like Tata Steel and Havells which will see inflows as a result of this MSCI rejig. All changes will be effective from the close of 31st August, so all the flows will happen well before that. For traders, it could be a short term trading opportunity for sure.
 

Watch: What is MSCI India Index

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History of the Chemplast Sanmar IPO

Chemplasr
15/08/2021

The Chemplast Sanmar IPO closed on 12 August and was subscribed a little over 2 times. However, what is interesting is that Chemplast was a listed company in India till 2012, before it delisted from the stock exchanges. Here is a look at the capital history of Chemplast Sanmar.

Back in 2012, Chemplast had delisted because the global scenario for chemicals had deteriorated drastically after the financial crisis. As a result, the losses had accumulated, debt equity ratio was 6:1 and the net worth had dipped into negative. Hence, the company took a voluntary decision to delist the stock from the bourses in 2012.

Accordingly, an open offer was made setting the buyback floor price at Rs.4.51 per share. However, under pressure from the large shareholders for ceding full control to promoters, the final buyback was done at a price of Rs.15 per share. Back then, the share was at a par value of Rs.1 per share. Today, the par value has been consolidated to Rs.5 per share so that gives an effective comparable delisting price of Rs.75 for 2012.

However, if you consider the current issue price of Rs.530 to Rs.541, it is still a little over 7 times the price at which the stock was delisted. With the outlook for the company still clouded, it raises issues over whether the promoters got the shares too cheap and are now selling it at seven times their cost of acquisition.

This raises a pertinent issue about the conditions under which delisted companies can relist. Currently, the only stipulation by SEBI is that relisting is permitted only after 3 years elapse. However, what is required is a better justification of the relisting and why the company delisted in the first place.

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Recent IPOs Performance 2021

Recent IPO
16/08/2021

The first four months of the fiscal year FY22 saw collections of over Rs.26,000 crore via IPOs. August alone is expected to collect close to Rs.30,000 crore via IPOs. But the moot question is how have these IPOs of the recent past performed in the stock markets post listing and has their performance been linked to the oversubscription? Here is a quick look.

Performance of recent IPOs
 

Company

IPO Price

Listed on

Subscription

List day gain

Current Price

Total Gain

GR Infraprojects IPO

Rs.837

19-Jul

102.58X

108.70%

Rs.1,667.05

99.17%

Clean Science IPO

Rs.900

19-Jul

93.41X

76.13%

Rs.1,611.80

79.09%

Zomato Ltd IPO

Rs.76

23-Jul

38.25X

65.59%

Rs.137.55

80.99%

Tatva Chintan IPO

Rs.1,083

29-Jul

180.36X

113.32%

Rs.2,157.90

99.25%

Glenmark Life IPO

Rs.720

06-Aug

44.17X

3.92%

Rs.757.75

5.24%

Rolex Rings IPO

Rs.900

09-Aug

130.44X

29.62%

Rs.1,149.20

27.69%

 

If you look at the 6 IPOs that listed in the stock markets since the middle of July, two IPOs of GR Infrastructure and Tatva Chintan have doubled over their issue price. On the other hand, IPOs of Clean Science & Technology and Zomato have given returns of 80% since listing. 

The two most recent issues listed in August; Rolex Rings and Glenmark Life had a more tepid listing. While Rolex Rings trades with gains of 27.7% over its issue price, Glenmark Life is just about 5.24% above its issue price.

Has the listing performance got to do with the extent of subscription? The two top performers; GR Infra and Tatva Chintan did get subscribed well over 100 times. However, Rolex Rings with 130X subscription has given only 27.69% returns. Glenmark Life, which gave the lowest returns of 5.24% over issue price was subscribed just 44.17 times. 

However, Zomato with just 38.25 times subscription is trading 81% above its issue price. In short, the post listing performance appears to have less to do with the extent of subscription and more to do with the aggression with which the IPO was priced and the valuation room left on the table by the issuing companies. 

Spate of 8 IPOs on the threshold of listing

While the above 6 IPOs are already listed, there are 8 more IPOs queued up for listing. Four of these IPOs will list on Tuesday, 17 August while the other four IPOs will list in the week after that. Here is a quick rundown.
 

Company Name

Issue Closure

Listing Date

IPO Price

Subscription

Exxaro Tiles IPO

06-Aug

17-Aug

Rs.120

22.65X

Windlas Biotech IPO

06-Aug

17-Aug

Rs.460

22.44X

Krsnaa Diagnostics IPO

06-Aug

17-Aug

Rs.954

64.38X

Devyani International IPO

06-Aug

17-Aug

Rs.90

116.70X

CarTrade Tech IPO

11-Aug

23-Aug

Rs.1,585-1,618

20.29X

Nuvoco Vistas IPO

11-Aug

23-Aug

Rs.560-570

1.71X

Aptus Value Housing IPO

12-Aug

24-Aug

Rs.346-353

17.20X

Chemplast Sanmar IPO

12-Aug

24-Aug

Rs.530-541

2.17X

 

We are yet to see the listing performance of these 8 stocks. In the case of the first four stocks listing on 17th Aug, the final price has been discovered at the upper end of the IPO price band in all cases. However, in the case of the 4 IPOs slated to list in the week after next, the final price discovery is yet to be announced.

To sum it up, the IPO price action since July has been fairly mixed, albeit with a positive undertone. These latest 8 IPOs could hold the key to the enthusiasm and aggression of the other IPOs in the anvil.
 

Check:

1. Upcoming IPOs in 2021

2. Upcoming IPOs in August 2021

3. List of Forthcoming IPOs

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CMS Info Systems files DRHP for Rs.2,000 crore IPO

CMS
16/08/2021

In the latest in the string of big ticket IPOs, CMS Info Systems has filed draft red herring prospectus with SEBI for a proposed Rs.2,000 crore IPO. The entire IPO will be an offer sale by Sion Investment Holdings Pte Ltd, an affiliate of Baring Private Equity.

CMS Info Systems has been privately owned for more than 13 years now. In 2008, Blackstone took controlling stake in CMS Info Systems which was later sold to Baring Private Equity in 2015. Currently, Sion Investment Holdings owns 100% stake in the company.

CMS Info Systems is predominantly involved in tech-enabled banking support services. Its revenues basically come from ATM and Cash Management, ATM installations, ATM maintenance services and personalized card services. While cash management accounts for 68.6% of revenues, managed services accounts for 27.9% of yearly revenues.

India is the third largest ATM market in the world in terms of installed ATMs and CMS has a leadership position in ATM and cash management. CMS manages over Rs.5,000 crore of cash per day and operates through an all-India network of 3,911 cash vans, 224 offices and services over 133,000 business points on an average.

For the fiscal year ending March 2021, CMS reported net sales revenues of Rs.1,322 crore and net profits of Rs.169 crore implying net profit margins of 12.78%. The company has appointed Axis Capital, Jefferies India, JM Financial and DAM Capital (formerly IDFC Securities) as BRLMs for the issue.

Interestingly, Baring had tried to do an IPO in 2017 but decided to withhold the idea after market conditions turned unfavourable. This is their second attempt at taking the company public. Being a total offer for sale (OFS), there will not be any fresh funds coming into the company.

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Exxaro Tiles IPO lists at 5% premium, remains rangebound

Exxaro
16/08/2021

The expectations were not too huge as the fall in GMP had hinted at a tepid listing. Exxaro not only had a tepid listing, but also remained in a range through the day. On 16 August, Exxaro Tiles listed at a premium of just 5% and managed to hold above its issue price of Rs.120, through the day.  With overall subscription of over 22.65X in the IPO, and retail subscription at over 40.05X, the listing response was relatively muted. Here is the Exxaro Tiles IPO listing story on 16 August.

The IPO price was fixed at the upper end of the band at Rs.120 after the 22.65X subscription. On 16 Aug, the stock of Exxaro Tiles listed on the NSE at a price of Rs.126, a premium of 5% over the issue price. On the BSE also, the stock listed at a price of Rs.126, representing listing premium of 5%.

On the NSE, Exxaro Tiles closed at Rs.132.30, a first day closing premium of 10.25% over the issue price. On the BSE, the stock closed at Rs.132.25, a first day closing premium of 10.21% over the issue price. The stock held on to gains through the day.

On Day-1 of listing, Exxaro Tiles touched a high of Rs.132.30 on the NSE and a low of Rs.126. On Day-1, the Exxaro Tiles stock traded a total of 46.33 lakh shares on NSE amounting to value of Rs.59.74 crore.  On the NSE, Exxaro closed at its highest point of the day.

On the BSE, Exxaro Tiles touched a high of Rs.132.30 and a low of Rs.126. On BSE, the stock traded a total of 7.41 lakh shares amounting to value of Rs.9.56 crore. At the close of Day-1, Exxaro Tiles had a market capitalization of Rs.592 crore with free-float market cap of just Rs.154 crore.

 

Check:

1. Upcoming IPOs in 2021

2. Upcoming IPOs in August 2021

3. List of Forthcoming IPOs

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Windlas Biotech IPO Listing

Windlas
16/08/2021

Windlas Biotech had a discouraging listing on 16 August as it listed at a discount to the issue price and during the day the discount only widened. The sharp fall in the GMP was already indicative of a weak listing, but the actual listing was below what the GMP had indicated. Windlas Biotech listed at a discount of -5% and traded through the day below the issue price of Rs.460. In fact, even the high price of the day was well below the issue price. With overall subscription of over 22.44X, listing response was fairly discouraging. Here is the Windlas Biotech listing story on 16 August.

The Windlas Biotech IPO price was fixed at the upper end of the band at Rs.460 after the 22.44X subscription. On 16 Aug, the stock of Windlas Biotech listed on the NSE at a price of Rs.437, a discount of -5% on the issue price. On the BSE, the stock listed at a price of Rs.439, a listing discount of -4.6%.

On the NSE, Windlas Biotech closed at Rs.406, a first day closing discount of -11.74% on the issue price. On the BSE, the stock closed at Rs.406.70, a first day closing discount of -11.6% on the issue price.

On Day-1 of listing, Windlas Biotech touched a high of Rs.452 on the NSE and a low of Rs.405. On Day-1, the Windlas Biotech stock traded a total of 41.04 lakh shares on NSE amounting to value of Rs.174.35 crore. The stock closed near to the low of the day.

On the BSE, Windlas Biotech touched a high of Rs.452.10 and a low of Rs.405. On BSE, the stock traded a total of 3.27 lakh shares amounting to value of Rs.13.89 crore. At the close of Day-1, Windlas Biotech had a market capitalization of Rs.886 crore with free-float market cap of just Rs.248 crore.
 

 

Check:

1. Upcoming IPOs in 2021

2. Upcoming IPOs in August 2021

3. List of Forthcoming IPOs

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