Not in a bubble zone yet but valuations high: Mirae Asset’s Gaurav Misra

25/08/2021

The relentless march of Indian stock markets over the past few months that has pushed benchmark indexes to record highs is raising concerns of overheating among a section of analysts, asset managers and investors.
But Gaurav Misra, co-head of equity at Mirae Asset Mutual Fund, feels Indian stock markets are not in a bubble zone yet even though valuations have crossed long-period averages.

Misra, who manages Mirae Asset’s focused fund and co-manages its popular large cap fund, says corporate balance sheets are healthier than before, the earnings outlook is strong and macroeconomic indicators are relatively stable.
He adds that while it is difficult to predict market movements in the short term, stocks will give superior returns than most other alternative avenues over the long term.

In the short term, Indian markets could be volatile or time correct, he said in an interview with Moneycontrol. A possible third wave of Covid-19 and any subsequent lockdowns could be a big overhang, he added

Misra says the Nifty has been among the better-performing markets worldwide this year, and the best among emerging markets. It is trading at a premium to most developed markets as well, except the US, and is also at a premium to its own historical averages. 

Globally, there is doubt of the impact of loose monetary policies on inflation. However, the Quantitative Easing policies after the 2008 global financial crisis hadn’t resulted in any untoward surge in inflation.
On the flip side, some major economies have higher levels of debt than a decade ago and there can be unintended consequences, he cautions.
On small and midcaps


Responding to a query on whether small and midcap stocks are overheating after jumping three-four times over the past year, Misra says many midcap and small companies will growth for the next few years.


“I do not think there is an overall case for or against any market capitalisation. The returns from here on will be driven by stock selection irrespective of market capitalisation,” he says.
He suggests that investors should pick the categories depending on their own risk considerations. But he advises against a large weight in smallcap stocks as more businesses in this category are vulnerable during a slowdown.
On IPO frenzy


According to Misra, the number of IPOs in India have been higher in six years over the past decade than in 2021.
However, 2021 is ranked second in terms of the amount of money raised via IPOs. And if the IPO pipeline is indication, 2021 will be the best year in a decade in terms of the quantum of money raised.
This highlights strong liquidity in the market, interest in new-age businesses and sectors, early investors taking profits, and a robust outlook for Indian corporate houses, he says.

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Indian investors’ interest in market fascinating, see rating downgrade: UBS

25/08/2021

Indian retail investors’ interest in stock markets is “fascinating” as they have been pumping money into both the primary and secondary market despite experts cautioning against super-rich valuations, according to UBS.

The Swiss brokerage and financial services firm said that while offshore investors have turned cautious due to expensive valuations, Indian households have been on a buying spree.

The bullish sentiment is not just restricted to direct participation in the stock market by retail investors. Flows from domestic mutual funds have also turned positive after four quarters, it said.

It raised a question mark whether such a herd push can be sustained as net outflows by foreign institutional investors (FIIs) tend to buttress the fact that valuations have run up too high.

FII outflows

In the current quarter (July-September), FIIs have already encashed $1.1 billion on a net basis as against inflows of $800 million and $7.3 billion in the preceding two quarters.
Even as the FIIs are pulling out money, Indian households have been investing heavily in the market and had a net purchase value of $5 billion in equities in the April-June quarter. This has pushed up direct retail direct ownership at a 12-year high, UBS noted in a report.

UBS said that there is not much wiggle room for further positive re-rating of stocks and sectors given the expensive valuations. It added that if low absolute returns continue that could lead to a fatigue in retail flows and stop the locally fuelled momentum. This could be accelerated by the fact that bank deposit rates, which were sliding and had turned retail investors to look at higher returns from other channels, have likely bottomed out.

Growth outlook
 

UBS also said that it projects the GDP growth rate for the Indian economy for the current fiscal year ending March 2022 at 8.9%, below the consensus estimates. The Reserve Bank of India has forecasted a 9.5% GDP growth for the current year, after trimming it from an estimated 10.5% earlier.
In its base case scenario, it expects India’s economic growth to gain momentum from October 2021. This will be due to pent-up demand (largely led by contact-intensive services, especially after more people are vaccinated), favourable external demand (on strong global growth) and higher government spending, UBS said.

UBS said it doesn’t foresee any meaningful rise in corporate investment in the next couple of years. It also expects inflation to average 5.5% in 2021-22. This will keep the RBI from raising monetary policy rates. Central banks typically raise interest rates when inflation rises beyond their comfort levels.
High debt, downgrade warning

UBS flagged that public debt has climbed to 88% of GDP in FY21, from 72% in the previous year, and said the GDP has to grow at 10% on a nominal basis to make it sustainable.

The brokerage house said that any lags in policy execution and implementation of growth-supportive reform to boost sustainable growth could lead to widening macro stability risks.

“In our base case, we foresee a risk of a downgrade in India's sovereign rating by one of the three rating agencies in the next 12-18 months,” it warned.

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Direct overseas listing for India Inc on the table. Here’s why it matters

26/08/2021

The Indian government is looking at allowing local companies to directly list on an offshore stock exchange, a long-standing demand of the corporate world especially tech startups who feel the pool of mature investors in such markets tend to value new-age businesses better.

Revenue secretary Tarun Bajaj said Wednesday the finance ministry was considering such an option but added some issues would need to be resolved first. He didn’t specify which aspects were the authorities looking at.

To be sure, the government had taken some steps for allowing direct overseas listing a year agowith amendments to the Companies Act, 2013. But much more needs to be done to actually allow such listings. In the past, the government wanted to foster local bourses and was keen to see Indian companies share wealth with local investors, who have limited access to overseas stock markets.

Bajaj’s comments come amidst a boom in the primary market both in India and abroad. A number of companies, including tech startups have already filed for initial public offerings in India. The successful listing of online food ordering company Zomato, which is now among the top 50 companies by market capitalisation, has bolstered other peers to look at local IPOs.

Around half a dozen internet companies are now listed in India. These include legacy players like jobs portal Naukri.com parent’s Info Edge, matrimonial platform Matrimony, B2B ecommerce firm IndiaMart and the recently listed CarTrade.

Mobile payments giant Paytm’s parent One97 Communications and peer MobiKwik are also looking to float IPOs on the domestic bourses. Paytm previously filed for an IPO in 2011 when it was still a value-added service provider to telecom companies but decided to scrap it fearing it would not get the right valuation.

Global investor base, SPAC route

However, many still feel several businesses would get a fair valuation and appreciation on the US markets where a global investor base that has been backing new-age technology stars for several years.This is partly due to the fact that a wider set of the peer group in a similar business on the same exchange would open such companies to a different set of investors as they come under the radar of investment analysts tracking a niche domain.

To push for direct overseas listing, some startup founders and their investors wrote a note earlier this month to the Prime Minister's Office. These startups included Byju’s, Swiggy, Urban Company, Cred, and Unacademy.

Some Indian companies have taken to innovative structures to still push through an overseas listing. Some Indian tech companies had listed overseas during the dotcom boom but a few other internet companies went public in the US over the last decade. These include travel companies MakeMyTrip and its arch rival Yatra. 

In fact, Yatra took a circuitous route due to lack of direct listing norms. It merged with a special purpose acquisition company (SPAC), also known as a blank cheque company. Earlier this week, one of India’s top renewable energy companies ReNew took a similar route to list on the NASDAQ.

To be sure, several Indian companies are separately listed abroad through depository receipts for decades. These are secondary listings after they already have the parent on the domestic bourses.
 

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Superstar Investor Alert: Rakesh Jhunjhunwala buys 0.3% stake in Jubilant Pharmova

As per bulk deals data published on NSE, Ace investors Rakesh Jhunjhunwala and Rekha Jhunjhunwala have increased their stake in Jubilant Pharmova, a radio pharmaceuticals manufacturer by 0.3%. 

The data shows Rekha Rakesh Jhunjhunwala acquired 20 lakh equity shares and Rakesh Radheyshyam Jhunjhunwala bought 25 lakh shares in Jubilant Pharmova at Rs 594.35 per equity share, but his firm Rare Enterprises sold 40.25 lakh equity shares at same price, as.

As per the shareholding pattern of June 2021, Rakesh Jhunjhunwala held in total 6.29 percent stake in Jubilant Pharmova. The net purchase by Rakesh Jhunjhunwala and Rekha Jhunjhunwala minus of the sale by

Rare Enterprises comes to 4.75 lakh shares or about 0.3 % of total paid up equity. At 11:15 am on August 26, Jubilant Pharmova stock was trading at Rs 629.95, up 3.02%. 

Recently Rakesh Jhunjhunwala bought 1.59% in Canara Bank. To know more about his portfolio and about portfolio of other superstar investors read here.

Big Bull Rakesh Jhunjhunwala's Portfolio 2021

Superstar Investor Alert: Azim Premji-associated market funds add two portfolio companies in Q1


 

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Vijaya Diagnostic fixes price band for Rs 1,895-cr IPO. Check details here

26/08/2021

Hyderabad-based pathology chain Vijaya Diagnostic Centre Ltd has fixed a price band of Rs 522-531 per share for its initial public offering that begins next month. 

Vijaya Diagnostic’s IPO will open September 1 and close two days later. The anchor bookwill open on August 31.This is the 39th IPO in 2021.

The IPO is completely an offer for sale of about 3.57 crore shares by the company’s promoters and private equity investor Kedaara Capital.The promoter Dr S Surendranath Reddy is selling about 51 lakh shares while Kedaara will offload the remaining.

The IPO will constitute at least 35% of post-offer equity share capital of the company. At the upper end of the price band, the IPO will raise almost Rs 1,895 crore.

Half of the IPO size is reserved for qualified institutional buyers while up to 35%has been set aside for retail investors and the remaining 15% for non-institutional investors.The company has also reserved 1.5 lakh shares for its employees and may allot these shares at a discount to the final issue price.

Investors can bid for a minimum of 28 shares and in multiples of 28 shares. This means retail investors can bid for shares worth at least Rs 14,868 for one lot. Their maximum investment would be Rs 1,93,284 for 13 lots of shares.

Vijaya Diagnostic provides a wide range of about 740 routine and 870 specialized pathology tests. It also offers 220 basic and 320 advanced radiology tests across a range of specialties.

The company is the largest integrated diagnostics chain in southern India by operating revenue. It has 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in Telangana, Andhra Pradesh, the National Capital Region and Kolkata as on June 2021.
 

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Ami Organics IPO opens on September 01

27/08/2021

Ami Organics Ltd’s initial public offering will open for subscription next week, with the company joining several other specialty chemicals manufacturers that have tapped into the stock market euphoria this year.
The company has fixed the price band for its IPO at Rs 603-610 per share. The offer will open on September 1 and close two days later. It will compete for investor attention with Vijaya Diagnostic’s IPO, which opens the same day.

Ami Organics IPO includes a fresh issue of shares of Rs 200 crore and an offer for sale of 60.59 lakh shares by 20 individual shareholders including Kiranben Girishbhai Chovatia and Parul Chetankumar Vaghasia.

The total IPO size will be Rs 569.63 crore at the upper end of the price band. The minimum bid lot size is 24 shares and in multiples of 24 shares thereafter. This means retail investors can subscribe for shares worth at least Rs 14,640 worth in a single lot. Their maximum investment would be Rs 1,90,320 for 13 lots.
The company reduced the size of the fresh issue to Rs 200 crore from Rs 300 crore after raising Rs 100 crore in a pre-IPO placement offering.

It plans to use the net proceeds from the fresh issue to repay its debt and to meet working capital requirements.

The company’s promoters own a 45.17%stake in the company. Its institutional shareholders include the Malabar India Fund and IIFL Special Opportunities Fund.

Ami Organics joins speciality chemicals maker Laxmi Organic and Anupam Rasayan to float an IPO this year. The company makes specialty chemicals that are used to develop advanced pharmaceutical intermediates.

The company posted consolidated revenue from operations of Rs 340.6 crore for the year through March 2021, up 42% from around Rs 239 crore for each of the previous two years. Net profit jumped to Rs 53 crore in 2020-21 from Rs 29.5 crore in 2019-20 and 24.7 crore the year before.

Intensive Fiscal Services, Ambit, and Axis Capital are the merchant bankers arranging the IPO.