Indian Indices Trade Marginally Higher; Realty Sector Up 1.9%

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the realty sector and energy sector witnessing maximum buying interest.

The BSE Sensex is trading up 93 points (up 0.3%) and the NSE Nifty is trading up 11 points (up 0.1%). The BSE Mid Cap index is trading flat, while the BSE Small Cap index is trading up by 0.4%. The rupee is trading at 63.46 to the US dollar.

In the news from the pharma space, Aarti Drugs share price is witnessing buying interest today. The stock of the company scaled its fresh 52-week high after the company informed bourses that it has fixed January 19 as record date for the purpose of buyback of upto 2.75 lakh shares representing upto 1.15% stake at Rs 875 per share.

Presently the stock of the company is trading up by around 5%.

Speaking of share buybacks, many buybacks are set to hit a new record this financial year. As per Prime Database, in the first five months of FY18, at least twenty companies have offered to buy back shares worth Rs 480 billion.

Also, in the past two years, the quantum of share buybacks has far exceeded the amount of new equity capital raised from IPOs.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in a recent edition of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

The topic also brings us to ask: Do buy-backs offer an arbitrage opportunity for retail investors? Ankit Shah has answered this question in a recent edition of Equitymaster Insider. You can access the issue here.

In the news from the IPO space, Apollo Micro Systems is going to launch its IPO tomorrow. The offer will be open from 10^th January till 12^th January and the company intends to raise Rs 1.5 billion from its public offering.

The price band of the IPO is finalised at Rs 270 to Rs 275 per share.

Apollo Micro Systems Ltd is Hyderabad based company engaged in the business of electronic, electro-mechanical, engineering designs, manufacturing and supply. The company designs, develops and sells high-performance, mission and time critical solutions to Defense, Space and Home Land Security for Ministry of Defense, government controlled public sector undertakings and private sectors.

The company offers custom built COTS (commercially off-the shelf) solutions based on specific requirements to defense and space customers.

We are tracking this IPO and will shortly release our analysis on the company. Stay tuned.

Speaking of IPOs, the demand for IPO's has reached sky-high levels. Avenue Supermarts was seen as the first company last year to cross the 100-time subscription mark swiftly followed by CDSL and Dixon technologies, among others.

IPO Subscription Times (2017)

This euphoria is something similar to what was seen in 2007-08. When everyone around you is clamoring to get a piece of the IPO pie, it makes sitting tight difficult. And, why should you sit tight when stocks like Avenue Supermart lets you pocket a cool 100% gain from day 1 of the listing?

History suggests that these cases are few and far between. More than 70% of the IPOs listed in 2007 and 2008 are in the red, even today when the Sensex is at an all-time high.

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 than not.

To know more, you can download our FREE report - How to Get Rich with IPOs. This guide will show you how to safely profit from the ongoing IPO rush.

This article was originally published in English at www.equitymaster.com

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