IRCTC IPO commands strong premium in grey market

IRCTC is offering a discount of Rs 10 per share to retail investors and employees.
State-run Indian Railway Catering and Tourism Corporation (IRCTC), which is set to launch its initial public offer, is trading at over a 50 per cent premium over its issue price band in the unofficial grey market.

Analysts said improved market sentiment, the firm's monopoly in the business and relatively cheaper pricing of the IPO are driving investor interest in the grey market, usually a harbinger of the stock’s prospects on listing.

In the grey market, shares of IRCTC are changing hands at a premium of Rs 160 compared to its price band of Rs 315 to Rs 320 per share, said brokers.

The Rs 645-crore IPO of IRCTC will open on Monday and close on Thursday. The issue comprises an offer for sale of 2 crore shares by the Government of India and is a part of the government’s divestment process.

IDBI Capital Markets & Securities, SBI Capital Markets and YES Securities (India) are the book running lead managers to the offer which constitutes 12.6 per cent of the total paid-up equity.

Its sales rose 25 per cent year-on-year to Rs 1,899 crore, and profit grew 23.5 per cent to Rs 272.5 crore in FY19

IRCTC is offering a discount of Rs 10 per share to retail investors and employees.

“There is no competition, growth is likely to be reasonable over the next few years and valuations are not aggressive,” said Geetanjali Kedia, senior research analyst at SPTulsian.com.

A fund manager with a domestic brokerage said the stock could test Rs 600 in a month after listing.

Investing via SIPs? Choose the right amount to reach your goal

Long Term SIP works for your financial goals only if you invest the right SIP amount for the goal.
You would have heard this countless times and from several people: SIP (systematic investment plan) investing works in the long term.
But even though it is a well-established fact (and the best option), there is something else that needs to be given a little more importance than it gets now.
Just because a long-term SIP in equity fund works, it does not mean that you will achieve your long-term financial goals.
Sounds surprising? But hear this out.
Long Term SIP works for your financial goals only if you invest the right SIP amount for the goal.
Random amounts won’t suffice
Let’s take a small example to understand this. Suppose you wish to save up Rs 1 crore in 15 years.
Now many would think that just by investing ‘some’ amount in a mutual fund SIP for 15 years and with hopes of earnings very high returns, you would be able to achieve your goal of Rs 1 crore in 15 years.
Unfortunately, it doesn’t happen that way. As they say, hope is not a great strategy to have in personal finance.
Let’s say that you begin investing a nice round figure of Rs 10,000 SIP per month and keep doing it for the next 15 years.
What would be the final amount after those 15 years?
Assuming 10-12 per cent annual average returns, the investor would accumulate Rs 41-50 lakh.
So, no doubt the SIP worked in the long term and you accumulated close to Rs 50 lakh by just investing Rs 10,000 per month for 15 years. But the point is did you achieve your actual goal of Rs 1 crore in 15 years? No.
And that’s because you did not invest the right SIP amount over these years.
Investing the right sum
A little bit of math will show that to accumulate Rs 1 crore in 15 years at 10-12 per cent returns, you need to do invest Rs 20,000-24,000 per month and not Rs 10,000.
Thus, long-term SIP will work (and it is small investors’ best bet); but whether it helps you reach your financial goals or not depends on not just the returns generated but also on the SIP amount you choose to invest.
You have to choose the right SIP amount to actually benefit from the long-term SIPs when it comes to achieving your financial goals.
In fact, it is so common to see people starting Rs 2000 SIP when they begin earning (like Rs 30,000 per month) and still continuing the same SIP amount of Rs 2000 when their income has increased to Rs 1 lakh a month! They do not increase their monthly investment. However, just a small increase of 5-10 per cent every year can result in the accumulation of a much larger final corpus.
Let’s take the above example of starting with Rs 10,000 SIP per month and see how the final amount changes if the investor increases the amount by just 10 per cent every year.
And the answer is Rs 74-87 lakh.
It is good that you understand that SIP works beautifully in the long term. But for your SIP investments to actually help you achieve your financial goals, you need to invest the right SIP amount and not just any sum.
Of course you would want to have a high rate of return on your investments. But understand what is in your control and what isn’t. How much you invest is in your control. How much you earn on those investments is under the market’s control.
As a long-term investor, and after identifying the goals you wish to invest for, first find out how much you need to invest through SIPs to meet those financial goals within your chosen timelines. You can use an excel calculator or talk to your financial advisor who can help you with it.

LIC remains market king despite short-term pains with 62.7% gain in equity holding value in 3 years

LIC is among the largest institutional investors in the equity markets

The Indian stock market may have seen its cycles of volatility over the past few quarters, and Life Insurance Corporation of India (LIC) lost Rs 22,506 crore in equity holding value between March and June.

Data compiled by Moneycontrol showed that LIC's equity holding value was at Rs 5.98 lakh crore at the end of the June quarter of FY20.

However, LIC – India’s largest insurer – has seen a 62.7 percent rise in the value of its equity holding over the past three years. The value rose by Rs 74,781 crore in FY19 itself.

Between June 2016 and June 2019, the value of LIC's equity holding rose by almost Rs 2.31 lakh crore. This is amidst talks that LIC wanted to keep equity investments below Rs 60,000 crore every year.

During the same period the BSE Sensex moved from 26,999.72 to 39,394.64.

While investing in the equity markets, LIC follows a “contrarian” investment strategy, which is “sell” when the sentiment is bullish and “buy” when the mood is bearish.

One of the largest equity investors in the country, LIC invests between Rs 50,000 crore to Rs 60,000 crore every year (net) in the markets every year. Being a life insurance company, LIC is required to invest a larger proportion of its portfolio into debt securities.

At the end of FY19, LIC's balance sheet size rose to Rs 30.5 lakh crore compared to Rs 27.9 lakh crore in the year-ago period. It had Rs 4.57 lakh crore worth of equity investments in its policyholders account.

Sources said that, in FY20, LIC might look to keep its net equity investments below Rs 65,000 crore.

It is already a majority shareholder in IDBI Bank holding 51 percent equity stake. LIC invested Rs 21,600 crore in the Bank in FY19, and this year, the insurer has put in Rs 4743 crore under capital infusion.

100 days of Modi 2.0: Investors lose Rs 12 lakh crore in mcap; 22 stocks in BSE500 plunge over 50%

The first 100 days of the Modi government 2.0 appear lacklustre on the parameters of economic growth and the performance of the equity market.

While the country's GDP growth fell to over 6-year low of 5 percent in the June quarter, equity benchmarks Nifty and Sensex have plunged 7.10 percent and 5.81 percent, respectively, since May 24.

Data shows that investors lost nearly Rs 12 lakh crore in the BSE-listed firms and as many as 22 stocks among the BSE500 pack plunged over 50 percent, from May 24 till date.

Stocks such as HSIL, Coffee Day Enterprises, Jet Airways, Reliance Capital and Indiabulls Integrated Services have lost over 70 percent of their market value during the said period.

A gamut of domestic as well as global factors was at play to bring the market down during the period.
The US-China trade war, the chaos around Brexit and geopolitical tension were the top global headwinds. At the domestic front, the budget proposal of tax surcharge on super-rich, a slump in auto sales and the liquidity crunch in the financial market triggered a fresh wave of outflow of foreign fund from the equity market.

The poor health of banks and NBFCs, disappointing quarterly earnings of the India Inc and an almost stagnant agri sector made the situation worse.
Foreign portfolio investors (FPIs) took off nearly 29,000 crore from the Indian equity market during July and August 2019.

The selling was widespread. Data from Ace Equity shows barring the IT sector, which rose about 7 percent, all sectoral indices experienced the heat of selloff following the return of the NDA government.

Govt may widen stimulus scope after RBI’s Rs 1.76 trillion bounty

While announcing the first stimulus package to revive growth on August 23, Finance Minister Nirmala Sitharaman said it was ‘only the start’ and one more set of announcements, focused on the sluggish real estate sector, would be announced this week.

The promised second instalment of a stimulus package to boost the economy that was to be announced by the middle of this week may be delayed ‘a bit’, two government officials said on condition of anonymity.

This is because the government is reworking and expanding the package after receiving a windfall gain in the form of a transfer of dividend and surplus by the Reserve Bank of India (RBI) on August 26, they added.

This instalment was supposed to focus on reviving the real estate sector. It could now expand its focus to textiles, infrastructure and tourism, and even consider tax incentives, maybe even a reduction in the Goods & Services Tax (GST) rate on automobiles, a demand voiced by the auto industry.

"The government is considering expanding the package to go beyond the real estate sector to include other sectors that are facing a slowdown," one of the two officials cited above said.

While announcing the first stimulus package to revive growth on August 23, Finance Minister Nirmala Sitharaman said that it was ‘only the start’ and one more set of announcements, focused on the sluggish real estate sector, would be announced this week.

The government is reassessing available resources in the light of RBI’s move to transfer Rs 1.76 lakh crore in 2019-20 (the money was transferred as of Monday, media reports said), and is reworking a more comprehensive second package to boost the economy that could be announced by the end of this week or next week, the officials said.

Sitharaman said in Pune that the government is yet to decide how to utilise the money. The Rs 1.76 lakh crore the government has received from RBI is double the budgeted amount of Rs 90,000 crore it hoped to. Part of this surplus will certainly be spent on the revival of the economy, the officials added.

HT learns that among the things being considered are capital investments and fiscal incentives to sectors such as real estate, textiles, infrastructure and tourism. There’s also an argument that the government should keep some of the money as a cushion for any exigency, for example, any slippage in revenue collection, the officials said.

The money will give the government the confidence that it can meet the fiscal deficit target of 3.3 percent of the gross domestic product in the current financial year, they added.

The first official said that the indirect tax collection in the current month is around Rs 90,000 crore as on date, and unlikely to touch the Rs 1 lakh crore mark, an impact of the current slowdown.

The Indian economy grew by 5.8 percent, the slowest in five years, in the January-March quarter of 2018-19. GDP growth has declined consistently since last year.

The auto sector, a weathervane of economic sentiment and also industrial health, has been especially hard hit with passenger car sales in July falling 30 percent compared to a year ago.
Officials said a final decision on the prudent use of the surplus from the RBI will be taken soon by the Finance Minister in consultation with top bureaucrats. The decision will be announced after consultation with the Prime Minister’s Office (PMO), the officials added.
Some experts in the government are not in favour of using the money for tax sops and instead want it to be used for capital investments.

Pronab Sen, India’s former Chief Statistician, said, "RBI’s Rs 90,000 crore was already budgeted, so Rs 86,000 crore is left [surplus]. Out of this, about Rs 54,000 crore is coming from the capital reserve, which will not be available the next year. Under these circumstances, it is not prudent to make the current expenditure, because the same resources will not be available next year."
Niranjan Hiranandani, President of the National Real Estate Development Council (NAREDCO), said the stimulus package announced by the Finance Ministry on August 23 would "infuse much-required liquidity" in the system that will also help the real estate sector, but the government should create a fund to bail out stressed companies.

"It doesn’t matter if it [the announcement] is delayed by a day or two. Even one-week delay will not make any difference. But, there is an urgent need to create a stressed fund to clear about three lakh incomplete projects in NCR {National Capital Region} alone as these projects are stuck due to fund crunch and banks are unwilling to lend," he said.