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Investment bankers can smell money on the Street and they are lining up companies to soak up the liquidity as fast as they can, before the music stops. There’s no need to pace the offers either, it seems. It reflects the huge appetite out there.
Four initial public offerings (IPOs) opened for subscription today. Together the companies plan to sell shares worth about Rs 3,500 crore. The largest of them, Devyani International, plans to raise at least Rs 1,775 crore. The IPO is priced at a discount to Jubilant FoodWorks and Burger King India, but at par with Westlife Development. Read our research team’s take on the Devyani IPO here. Krsnaa Diagnostics, Windlas Biotech and Exxaro Tiles are the other three IPOs that have opened for subscription.
Equity markets, meanwhile, are holding up at record highs, with banking and financial services stocks leading the gains at noon. Investors have reasons to be optimistic. The June quarter earnings season has been decent till now. Thanks to selective restrictions, companies withstood the second wave better. “The earnings season has been in-line, benefiting from the lower base of Q1 FY21, as lockdowns in Q1 FY22 quarter were localized and less stringent,” Motilal Oswal Financial Services said in an interim review note.
At the broader economy level, the conditions for a recovery in the capital expenditure (capex) cycle are falling in place. As we argue in two of our pieces today, the order announcements by industrial firms and contract-awarding agencies has been surprisingly healthy in the June quarter. The Centre’s commitment of a multi-trillion rupee push for infrastructure may push the wheels of India's capex cycle out of a decade-long rut.
The revival in capex cycle will strengthen the economic recovery although the incoming data is flashing mixed signals. The uneven recovery is reflective in July Purchasing Managers Indices (PMIs). The manufacturing PMI rebounded from June. But the services reading remained in contraction territory even as the pace of reduction moderated sequentially. “The current COVID-19 environment continued to weigh on the performance of the service sector that is so crucial to the Indian economy. July data was somewhat disappointing, with incoming new business and output falling solidly over the month,” said Pollyanna De Lima, economics associate director at IHS Markit.
That warrants caution, not just about the economic recovery but also about the current euphoria in the primary markets. Resurging COVID-19 infections are threatening to halt the economic recovery in Asian countries. A ramp-up in vaccination and adherence to precautionary measures will be crucial to contain infections in India.Do check out these investing insights from our research team:
Krsnaa Diagnostics IPO: Should one foot the bill for this diagnostics?
Airtel continues to benefit from the pandemic
Adani Ports & SEZ: Back on the growth path
Dabur India: Double-digit volume growth, market share gains continue unabated
What else are we reading today?
How easy is it to cross Policybazaar’s moat?
SEBI opens the door for retail investors to invest in higher yielding investment trusts
Chart of the Day | PMI: Private sector activity slips in July, third month in a row
Quants may upend corporate debt and private equity markets next (Republished from the FT)
Picks from our Technical Analysts:
State Bank of India, IndusInd Bank, L&T and Bharti Airtel (These are published every trading day before markets open and can be read on the app)
R Sree Ram