Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.5% while the Hang Seng is up 0.8%. The Shanghai Composite is trading up by 0.1%. Meanwhile, the Nasdaq Composite hit a record high on Tuesday as Alphabet's blowout results sparked a rally in high-growth stocks and bolstered expectations of a robust earnings season, while a rise in oil and metal prices boosted energy and material companies.
Back home, India share markets opened the day on a flattish note. The BSE Sensex is trading up by 24 points while the NSE Nifty is trading down by 4 points. The BSE Mid Cap index opened and BSE Small Cap index both opened the day up by 0.5%.
The rupee is currently trading at 69.05 to the US$.
Meanwhile, small-caps seem to be displaying withdrawal symptoms right now.
But as Ankit Shah, Editor of Equitymaster Insider says, such corrections are a healthy part and parcel of the game of investing.
In one of his earlier editorials, he had shown how the BSE Sensex is not a truly representative market barometer. While the Sensex continues to stay steady close to its all-time high levels, the rest of the market has corrected significantly.
Recently, he carried out a similar study on the BSE Smallcap index.
Here's what he found...
The average (both mean and median) correction of the BSE Smallcap index stocks has been 38% from their respective 52-week highs.
The Rise and Fall of the Small-Cap Index
Ankit believes that the ongoing market correction could offer some fantastic buying opportunities for disciplined and patient small-cap investors.
Moving on... Sectoral indices have opened the day on a mixed note with metal stocks and healthcare stockswitnessing maximum buying interest. While, consumer durables stocks and IT stocks have opened the day in red.
In the news from the paints sector. In the latest development, Asian Paints, one of the largest paint companies in India, started off the financial year 2018-19 with 30% profit growth in June quarter, backed by operational performance and product price hike. The growth was also due to low base in the previous year.
Consolidated profit for the quarter stood at Rs 5.7 billion, which increased from Rs 4.4 billion in corresponding period last fiscal.
Revenue from operations grew by 15.1% year-on-year to Rs 43.9 billion with double digit volume growth in the decorative paint business.
EBITDA (earnings before interest, tax, depreciation and amortisation) shot up 31.4% year-on-year to Rs 8.7 billion and margin expanded by 250 basis points to 19.9% in Q1FY19.
Asian Paints said it is taking steps to pass on the benefit of GST rate reduction to the customers but it is seeing a continuous increase in raw material prices and expects an inflation of almost 10% in the second quarter.
The company further said it has passed only a part of this impact through the cumulative 3.3% price increases taken in March and May and should have ideally looked at further price increase.
On July 21, GST Council reduced rate on paints, wall putty and Varnish to 18% from 28%.
Further, its international operations faced challenging conditions with issues like forex unavailability, difficult weather conditions impacting business performance.
Asian Paints share price opened the day down by 2.2%.
Moving on to the news from IPO space. HDFC Asset Management Company, the joint venture between Housing Development Finance Corporation and Standard Life Investments, has opened its initial public offering for subscription today.
This is the sixth public offer of the current financial year 2018-19, after TCNS Clothing, Varroc Engineering, RITES, Fine Organics Industries and Indostar Capital Finance.
The price band of the issue is set at Rs 1,095 to Rs 1,100 apiece.
HDFC Asset Management Company (HDFC AMC) is the asset management arm of Housing Development Finance Corporation (HDFC Ltd). Promoted by HDFC in 1999, Standard Life Investments (SLI) acquired 26% stake in HDFC AMC in 2001, and now the company operates as a joint venture between HDFC and SLI.
The company has been the largest AMC in India in terms of equity-oriented AUM since the last quarter of FY11.As of March 31, 2018, its proportion of equity-oriented AUM to total AUM was at 51.3%, which was higher than the industry average of 43.2%. Equity-oriented schemes generally have a higher fee structure than non-equity-oriented schemes, and this is where HDFC AMC wields its competitive advantage.
To know our view on this IPO, you can read our IPO note on HDFC Asset Management Company Ltd (requires subscription).
IPOs seem to be back in action as eighteen initial public offerings (IPOs) in the first six months of 2018 raised Rs 236.7 billion. This compares to Rs 120 billion that thirteen companies raised via IPOs in the year-ago period.
Note that the stock market is gearing up for a burst of IPO activity, with at least 12 companies planning to raise more than Rs 170 billion over the next two months, after a quiet start to the June quarter.
Also, according to EY India IPO Readiness Survey Report, globally, Indian exchanges recorded the highest IPO activity as the country saw 90 IPO launches that raised US$ 3.9 billion in the first half of this year.
We believe a merit-based selection, primarily including valuation, business, and management quality, is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.
To know how to safely profit from the ongoing IPO rush, download this FREE report now and discover How to Get Rich with IPOs.
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This article was originally published in English at www.equitymaster.com
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