Nifty 50 Journey to 10,000 level

NIFTY 50 is a broad based index consisting of 50 large and liquid companies listed on National Stock Exchange of India (NSE). NIFTY 50 is the benchmark index of India, reflecting the overall conditions of Indian equity market as well as Indian economy. Over the years, NIFTY 50 has be-come the most widely used benchmark for exchange traded products in Indian equity market.

NIFTY 50 & GDP growth rate

Growth rate of India’s GDP is fairly captured in the growth story of NIFTY 50. Over the years, India has been one of the fastest growing large economies of the world which is also reflected in the rise of NIFTY 50 Index.

Performance of NIFTY 50 and GDP Growth Rate

nifty 50 and growthNIFTY 50 values as on financial year end & on days of reaching multiples of 1000 levels and GDP growth rate for respective financial year.

Beginning FY 2003-04, Indian economy was in a boom phase driven mainly by investments until it was disrupted by the global financial crisis of 2008. Large fiscal stimulus helped spur the growth process and so India began to recover much before most economies of the world.

Recovery had been hampered by temporary shock in FY 2016-2017, while since beginning of FY 2017-18, market has picked momentum primarily on back of introduction of GST & several other reforms intro-duced by the Government of India.

The 10,000 milestone that NIFTY 50 has reached is a faithful representation of India’s growth prospects.

nifty1

Journey to 10,000 level

From its base value of 1000 in November 1995, the NIFTY 50 reached the 2000 mark in December 2004, taking 9.1 years to double. Thereafter, the journey of NIFTY 50 was swift wherein it reached the 6000 mark in only 2.9 years. It took another 6.4 years to reach the 7000 mark in May 2014 from 6000 in December 2007. The 9000 level was achieved in March 2017 which was relatively faster from 7000 level taking only 2.8 years.

The flagship index ‘NIFTY 50’ hit the 10,000 mark on July 25, 2017, taking only 4.3 months to move from 9000 to 10000.

Time takenMethodology

The NIFTY 50 Index tracks the performance of a portfolio of the 50 largest and most liquid Indian securities. The companies are filtered for liquidity on the basis of impact cost which is the cost of executing a transaction in a security in proportion to its index weight, measured by market capitalization at any point in time. NIFTY 50 methodology delivers the most replicable and reliable benchmark index for the Indian equity market.

Index is rebalanced on semi – annual basis. The cut-off dates are January 31 and July 31 of each year, i.e. for semi-annual review of indices, average data for six months ending the cut-off date is considered. Four weeks prior notice is given to market from the date of change.

NIFTY 50 Index has an inception date of November 3, 1995. The index was constructed using a unique concept of impact cost, which helps in the selection of highly liquid stocks and results in the creation of a replicable index. Initially constituents were weighted on the basis of full market capitalization and from June 26, 2009 onwards, the computation was changed to free float methodology.

Buffett’s Metrics Says, ‘Have No Fear’ to Sensex

Performance

Since inception, NIFTY 50 has given annualized returns of 11.2% while having annualized volatility of 24.5%. Volatility in recent periods has reduced from over 24% since inception to close to 8-11% in more recent times (6 month to 1 year period). The return to risk ratio of NIFTY 50 has also improved substantially over the years from 0.46 since inception to 1.98 in the last 6 month period.

NIFTY 50 as on July 24, 2017 was trading at P/E of 25.45x and P/B of 3.55x which are lower than the previous highs of 28.5x on Feb 11, 2000 and 6.6x on Jan 08, 2008 respectively.

NIFTY 50 Performance – Price Return Index (Nov’95 to Jul’17)

performance

Nifty 50 Performance – Return and Risk

risk vs return

Calendar Year Performance

In terms of calendar year returns, since 1996, NIFTY 50 has given more than 50% return in 4 calendar years and more than 30% return in 7 calendar years. NIFTY 50 has fallen by over 20% only in 2 calendar years, giving positive returns in 15 out of 23 years.

Calender Year wise performance of NIFTY 50

calender wise

At the time of inception, NIFTY 50 represented 13 sectors while there are 12 sectors as of June 30, 2017. Over the years weight allocation in these sectors has undergone a significant change. IT sector was not represented at the time of inception, but now represents around 11.6% of weight in the index as on June 30, 2017.

Sector weights for 1995 is as on date of inception (Nov 03, 1995) and for 2017 & 2005 as on June end.

sectorwise

From 1995 to 2017, weights of financial services sector has increased from 19.7% to 35% and for metals and consumer goods have declined from 11.6% to 4% and 18.8% to 11.2% respectively. Other sectors like chemicals & textiles which represented 5.4% and 5.5% respectively at the time of inception, no longer form part of NIFTY 50.

 

Japanese investors Nomura India Fund owned $13 billion of Indian stocks and bonds

“India is the only country among major emerging markets that satisfies all the conditions — a sizable economy, high growth rate and yield, and political stability,” said Go Ikeda, a senior fund manager at Mitsubishi UFJ Kokusai Asset Management Co.

“Investors are looking at where the growth will be in the medium to long term, without having to worry about short-term swings in the market.”Kazuto Wada, an executive director at Nomura, Japan’s largest brokerage.

Indian economy that’s growing at 7 percent annually with reforms showing tangible progress.

India’s economy is expanding at about seven times the pace of Japan’s, buoyed by a burgeoning middle class and more one than million young people joining the labor force every month. Indian shares have hit multiple records this year amid optimism about Prime Minister Narendra Modi’s policies.

Sumitomo Mitsui Asset Management Co.’s Indian bond fund, co-managed with Kotak Mahindra Asset Management, took in a net 24 billion yen ($214 million) from December through June, lifting total assets to about 87 billion yen as of July 10.

Japanese investment trusts’ holdings of Indian securities more than doubled to 898 billion yen in June from a year earlier, data from Investment Trusts Association, Japan show.

The rupee has gained 5.8 percent versus the dollar in the past six months in Asia’s top performance. The nation’s 10-year bond yield of 6.45 percent ranks second after Indonesia among major Asian economies and compares with 0.07 percent in Japan.

The combined assets of three India funds run by Nissay Asset Management Corp. have topped 100 billion yen since their launch 2015.

For Franklin Templeton’s Michael Hasenstab, “unprecedented” structural reforms by Modi and relatively high yields make India a “sweet spot” among emerging markets. On July 1, India introduced a goods and services levy designed to unify the nation into a common market and widen the tax net.

noumura

Kato shared his views in an interview in Tokyo on Friday.

Key Point

Why is India so popular now?

  • India is becoming a popular destination because of improvements in fundamentals.
  • The fiscal deficit has narrowed and is likely to shrink further, while the current-account deficit has also decreased. Inward direct investment can finance the current-account gap, which is positive for the rupee and currency stability.
  • Inflation has been under control and the Reserve Bank of India has gained credibility for curbing it.
  • A series of positive news including the ruling party’s win in state elections have helped boost Prime Minister Narendra Modi’s government; the goods and services tax roll out has led to limited disruption, nd the impact from the scrapping of high-value currency bills has been smaller than expected.

How does India compare with other countries?

  • Stocks in developed markets look relatively expensive and face more downside risks, while bond yields in those markets may rise amid hawkish tone of major central banks.
  • India’s defensive character also makes it stand out; it is less dependent on exports and when the global economy is weakening, because domestic demand is solid, the impact from a slowdown is less.
  • The South Asian country’s reliance on China is low in terms of trade and the two don’t compete in terms of the goods they sell in global markets. That makes India resilient to external shocks.
  • India is a net importer of oil and falling crude prices contribute to a lower trade deficit and slower inflation. Foreign ownership of Indian bonds is also relatively low, which shields it at a time of capital flight.

What is your outlook on RBI’s monetary policy, impact on bonds?

  • Even if the RBI cuts rates, yields are unlikely to drop sharply because the move has been priced to a certain extent. The 10-year rate will probably stay above 6 percent, which remains relatively high, while the rupee may also remain stable. The real yield will still be high and the nation’s debt will continue to be attractive for foreigners.

What is your outlook for the rupee?

  • The rupee is likely to trade steady, near the 65 per dollar area. From a valuation standpoint, the currency seems to have become expensive but a narrower current-account deficit and ability to finance it with the direct investment should be supportive.

Rupee

What does the India bond fund hold now?

  • Rupee bonds account for about 70 percent of total assets, while dollar-denominated notes make up the rest. The fund is becoming cautious about its dollar-bond holdings on prospect for higher interest rates.
  • Duration of the dollar notes is also relatively shorter at about three years, while that of local-currency securities is longer at about 6 to 6.5 years as yields are under pressure because of stable inflation outlook

With assistance by Garfield Clinton Reynolds

Are New Fund Offers From Mutual Funds Beneficial?

We can see that as the market rises, new fund offers from the mutual funds are on the hike. Numerous fund houses offer the investors by using an appealing and thematic advertising. NFOs might be for many types of funds like fixed maturity plans, hybrid funds, close end/open end debt funds and equity funds.

Reason behind introducing NFOs

NFOs (New Fund Offers) are introduced for a new scheme launched by the asset management company. NFOs are mainly first time subscription offers to come with a new scheme. It is initiated to collect more capitals from the public to purchase securities from the market like shares, government bonds etc. Several times an NFO is introduced by a fund house or a management company just to complete the monthly target or its product basket or if investors demand any certain theme which can’t be played in an open end strategy. NFOs can be introduced for both open and close-end funds. Closed-end funds usually have a tenor between 3 to 4 years. One can make an investment during the offer period only in a closed-ended NFO. But an open-end fund opens again for subscription and investors have the possibility to subscribe at any time after its re-opening at the existing NAV (Net Asset Value).

Why is an NFO different from equity IPO?

NFO

An NFO and an IPO (Initial Public Offering) is totally different from each other.

ipo

IPOs are issued for mainly two purposes, either by companies seeking capital to expand or by big privately-owned organizations to market themselves publicly. On the other hand, an NFO from a mutual fund is just used to pull out the money from the investors and that money is then invested in purchasing the securities like stocks and govt. bonds etc. based on a specified strategy. It is very hardly seen nowadays that IPOs are done at face value as mostly they are done at a premium to face value while an NFO is always available at a minimal cost of Rs.10.

Conclusion

According to financial planners, ‘Since NFOs are offered at a minimal price of Rs.10, most of the investors got to engage in this trick as a comparison to open-end schemes which might have higher NAVs which is not right. According to many wealth managers, investors must not go for close-end NFOs which often play an existing theme. They suggest investors, to remain attached to the open-end schemes from the mutual fund houses which have an earlier track record.

The plus point in the case of existing schemes is that the portfolio is well known, the investment techniques of the fund managers are also known and the schemes are very well tested and tracked by the investment analysts. On the other side, in an NFO it is not properly known what the portfolio will look like, how much assets the fund will collect and many more things. Some financial planners suggest that the investors should invest in an NFO only if the offer has something dissimilar to the offer from the existing funds or if in the case it is not possible to do something in an open-end fund.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.

Salasar Techno Engineering Ltd IPO Review

Salasar Techno Engineering Ltd  manufactures galvanized steel products including  telecommunication towers, power transmission line towers, smart lighting poles, monopoles, guard rails, substation structures, solar module mounting structures. The company recently increased its installed annual manufacturing/fabrication capacity from 50,000 MT to 1,00,000 MT

Salasar Techno Engineering is an ISO 9001: 2008, 14001: 2004 and 18001: 2007 certified company that addresses the changing needs of the customers in Infrastructure space.

The customer list includes U.P. Power Transmission Corporation Ltd, Tata Power Delhi Distribution Ltd., Unitech Power Transmission Ltd, orders of Telecom Towers including erection of towers for ATC India Tower Corporation Pvt Ltd, Indus Towers Ltd, ATC Telecom Infrastructure Pvt Ltd, Bharti Infratel Ltd, Reliance Jio Infocomm Ltd, Tower Vision India Pvt Ltd, Viom Networks Ltd, and  it supplies Solar Mounting Module Structures for Jakson Engineers Ltd, Prayatna Developers Pvt Ltd, Welspun Renewables Energy Pvt Ltd., Insta Power Energy Efficiency Pvt Ltd etc.The company exports its galvanized products to South Africa.

Salasar-Techno-Engineering-IPO-

IPO Particulars:
IPO Opens on : Jul 12, 2017
IPO closes on :Jul 17, 2017
Issue Type: Fixed Price Issue IPO
Issue Size: 3,321,000 Equity Shares of Rs 10 aggregating up to Rs 35.87 Cr
Face Value: Rs 10 Per Equity Share
Issue Price: Rs 108 Per Equity Share

Minimum Order Quantity: 125 Shares
Retail allocation : 50%

The object of the issue :
To meet the working capital requirements of the Company including margin money

The promoters :
Mr. Gyanendra Kumar Agarwal,
Mr. Alok Kumar,
Mr. Shalabh Agarwal and
Ms. Tripti Gupta

Salasar Techno IPO

Financials:

Turnover and Net Profit for 2016-17 are Rs. 384.64 cr. / Rs. 20.74 crores & it has posted an EPS of Rs. 20.83. For last three fiscals, it has posted an average EPS of Rs.15.17. For FY 17 it has posted an EPS of Rs. 20.83.If we attribute latest earnings on fully diluted equity post issue then asking price is at a P/E of 6.8 plus and a P/BV of 1.12. Last three fiscal’s average RoNW is 17.36 %. Peers are trading at a P/E of 18 plus. Thus the issue is pricing is reasonable.

Reasons not to invest in this IPO (Negative Points)

The decrease in Sales of its wholly owned subsidiary, Salasar Stainless Limited in last three financial years.

Its inability to effectively manage its growth or to successfully implement its business plan and growth strategy could have an adverse effect on its business, results of operations and financial condition.

Any delay or default in payment from its customers could result in the reduction of its profits and affect its cash flows.

The company faces foreign exchange risks, primarily in its export operations that could adversely affect its results of operations.

The company may not be able to qualify for, compete and win orders for Transmission Towers, which could adversely affect its business and results of operations.

Salasar Techno IPO TOWER

Companies top five clients contribute approximately 63.52 % of our revenues for the period ended September 30, 2016. Any loss of business from one or more of them may adversely affect its revenues and profitability.

One of its Group Entity namely Hill View Infrabuild Ltd had incurred a loss in the financial year 2015-16.

Company face competition in its business from domestic competitors. Such competition would have an adverse impact on its business and financial performance.

There is outstanding litigation by/against its Company, its Subsidiary Company, its Promoters, its Directors and its Group Entities and any adverse outcome in any of these proceedings may adversely affect its profitability and reputation and may have an adverse effect on its results of operations and financial condition.

The company had negative cash flows from its investing activities as well as financing activities in some of the previous year(s) as per the Restated Standalone Financial Statements.

The company has availed certain unsecured loans that are recallable by the lenders at any time.

Au Financiers (India) Limited IPO! Put in or out ?

Positive

Business Agreement with Ramboll

Steady financial performance

Optimum Galvanizing Capacity

 Customer Centric Approach

Posible growth through a robust order book and excellent pre-qualification credentials

Experienced management and promoters

BUSINESS STRATEGY

Increasing Installed Capacity and Expanding the Product Portfolio

Expanding Design and Engineering Capabilities

Targeting New Customer Accounts and Expanding Existing Ones Developing Camouflaging Capabilities for Monopoles

To carry on the business consultants, engineers, designers, fabricators, converters, molders, smelters of mechanical, electrical, electronic and other type of components & tools, control panels, assemblies, sub- assemblies and machines parts and all kinds tools.

To manufacture, trade, import, export, trading and fabrication of iron and steel metal and malleable,ferrous and non-ferrous metals, special and alloy steel, spring steel and of all types of forged components and accessories, alloys, rods, angles, sheets, girders,pipes, channels, nut bolts machineries, accessories, steel rounds, nails, tools, all types of hardware items and it allied products, and to buy take on hire sell, import, export, otherwise deal in such products, by products, machineries, rolling stock, implements, tools, utensils, ground tools, materials and conveniences of all kinds.

HOW CAN YOU SETTLE YOUR INSURANCE CLAIM IF REJECTED?

To carry on the business of electrical engineers, mechanical engineers, civil engineer, electrical engineers, contractors, manufacturers, suppliers and dealers in electrical, mechanical and other appliances and works including electrical motors/pumps, electrical sub-stations, power distribution transformers component of engineering items, switchgears, spares control pane ls & parts thereof.

To carry on business as iron and steel founders, steel makers, steel shapers and manufacturers and fabricators, contractors, tool makes, brass-founders, metal workers, manufacturers of steel, metal and malleable, grey-casting including ferrous, special and alloy steel, spring steel, forging quality steel manufacturers and to buy, take on lease on hire, sell, import, export, manufacture, process, repair, convert, let on hire, otherwise deal in such products.

Current Grey market premium is Rs.65/- to Rs.67/-

Conclusion

Company issue size is only 35.8 crore.Valuations look very attractive for Salasar Techno Engineering. However, it is worth noticing that this small IPO will be eventually listed in the T group which effectively means more restrictions on price movements and less attractiveness for investors.

On merchant banker’s front, this is the first IPO for main board from its stable. It brought 28 SME IPOs since 2012 and out of last 10 IPOs listings, only 1 IPO opened below the offer price.

DISCLAIMER

No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.