2007 saw investors making big bucks with 9 out of 10 major public issues helping rake in the moolah. But 2008 has been quite the opposite. Out of the 40 companies that were listed this year, 32 are trading below their issue prices (ie at lower prices than was offered to the public), a TOI analysis shows.
The average initial public offer (IPO) has lost 31% from its date of listing this year, in line with the correction in broader market indicators such as Sensex that has lost 36% in the last nine months. IPO investors, who still hold shares, in companies such as Porwal Auto, Niraj Cement, Tulsi Extrusions, Manaksia, KNR Constructions, Precision Pipes etc. will be ruing their fate. As these are some of the names which figure in the biggest losers. They are not alone.
Two out of four IPOs are available at cheaper prices in the range of 40-80 % than their issue prices, data shows. “The end part of 2007 and the early part of 2008 were clearly times where the market accepted a lot of excess... in terms of valuation , price asked and unrealistic prospects. Indian stocks might have taken beating but correction is what has happened for some of the IPOs,” said the research head of a foreign brokerage house.
Just a few IPOs, eight of them in fact, such as tech firm Vishal Info, pharma company Anus Labs, textile firm Bang Overseas and Gokul Refoils have managed to give positive returns, data shows. “Still investors should do their due diligence before buying beaten down IPO stocks. A mere 50% below issue price is not the only indicator for buying a stock. The IPO (primary market ) is a clear reflection of what is been happening in the secondary markets,” a senior market analyst said.
The absence of any sector bias towards the correction of stock prices that has happened post-listing for 2008 IPOs is also worth the mention as companies involved in construction , information technology , infrastructure, healthcare , telecom all have casualties , the analysis reveals.
The only good news for investors could be that recently listed IPOs have had a fairly good experience than their earlier counterparts. “The onset of correction and lack of appreciation for the rich valuations demanded earlier might have compelled lead bankers and promoters to leave more on the table,” the research head of the foreign brokerage reasoned.
Thursday, 2 October 2008
3 of every 4 IPOs trade below issue price
Volatile but buoyant - Markets on 01/10/2008
Led by buying in IT and banking stocks, the Sensex recovered smartly in afternoon and ended firm at 13,056.
The market wiped out a loss of over 163 points incurred in the first half after a strong bout of buying led by information technology (IT)and banking stocks triggered a wide-spread buying.
The Sensex started the day 147 points higher at 13,007 following weakness in Asian indices and crashed to the day's low of 12,697 on relentless selling. While the market recovered thereafter, the Sensex witnessed a sharp turnaround in afternoon as gains in heavyweights, IT, banking and consumer durable stocks propelled it to an intra-day high of 13,204. After gyrating 507 points during the intra-day trades, the Sensex gained 195 points to close at 13,056, while the Nifty ended 30 points higher at 3,951.
The market breadth was positive. Of the 2,672 stocks traded on the BSE, 1,476 stocks advanced whereas 1,123 stocks declined. Seventy three stocks ended unchanged. The BSE IT index led the pack and gained 3.97% followed by BSE Bankex (up 3.23%) and BSE CD (up 2.95%).
Satyam Computer Services was the star performer among the heavyweights and the stock soared 7.47% at Rs318.75. Among other major gainers, JP Associates advanced 7.02% at Rs118.90, HDFC Bank jumped 5.26% at Rs1,294, Grasim Industries rose 4.63% at Rs1,765.70 and Tata Power moved up by 4.46% at Rs946.50. Infosys Technologies advanced 4.03% at Rs1,453.90, ICICI Bank gained 3.10% at Rs551.45 and Tata Steel added 3.07% at Rs438.65. However, Larsen & Toubro, DLF and Reliance Industries inched lower.
Over 1.23 crore shares of Reliance Natural Resources changed hands on the BSE followed by IFCI (0.81 crore shares), JP Associates (0.71 crore shares), Chambal Fertilisers and Chemicals (0.55 crore shares) and Ispat Industries (0.49 crore shares).
Buy Alchemist
We recommend a buy in Alchemist from a short-term trading perspective. It is apparent from the charts of Alchemist that it was on a medium-term downtrend from its early August high of Rs 105 to September low of Rs 71.
However, after taking support at around Rs 70 recently, the stock bounced up sharply. On October 1, the stock surged 6 per cent, breaking through the medium-term down trendline. Moreover, the stock’s surge has also penetrated the 21-, 50-, 200-day moving averages compression conclusively. We notice very high volume over the past 6 weeks.
The daily relative strength index is on the verge of entering in to the bullish zone from the bearish region. The moving average convergence and divergence is signalling a buy. We are bullish on the stock from a short-term perspective and expect it to move up until it hits our price target of Rs 100 in the forthcoming trading sessions. Traders with short-term perspective can buy the stock while maintaining a stop-loss at Rs 84.
Day Trading Guide - 03rd October 2008
(The analysis and opinion expressed in these columns are based on the technical analysis of the past price behaviour. The stop-loss level provided with the recommendation is important. The original view would stand negated if the stop-loss level is breached. There is a risk of loss in trading)
Axon prefers HCL Tech’s offer to Infosys’
In a move that places HCL Technologies ahead in the race for the acquisition of the Axon Group, the Board of the UK company on Thursday dropped its recommendation of Infosys’ 600 pence a share offer, and said it would unanimously recommend HCL’s 650 pence a share bid to its shareholders.
This assumes significance as the recommendation by the Axon board establishes HCL’s offer as a ‘friendly bid’ and not a ‘hostile’ takeover, sources said. Moreover, while the shareholders in any case would have opted for a higher bid, the recommendation also means that HCL now has the option to convert its offer into a scheme of arrangement.
Punj Lloyd can touch Rs 335-350
Punj Lloyd can touch Rs 335-350 as per E Mathew.
Mathew told CNBC-TV18, "Punj Lloyd has the potential of keeping the stoploss of around Rs 270-275. The stock certainly has a potential slowly and rarely to move upto as high as Rs 335-350."
JP Associates can rally to Rs 135-145
As per E Mathew JP Associates can rally to Rs 135-145.
Mathew told CNBC-TV18, "Jaiprakash Associates is going to participate in a pullback rally. It has been massacred and I think the stock has the capability of rallying to Rs 135-145. But for all those people who are stuck at higher levels and including those who are now participating in a pullback rally, they would certainly have to bailout on the region between Rs 135 and Rs 145."