Indian Indices Continue Momentum, Healthcare Stocks Witness Buying

Stock markets in India are presently trading on a positive note. Sectoral indices are trading on a mixed note with stocks in the healthcare sector and metal sector witnessing maximum buying interest.

The BSE Sensex is trading up 233 points (up 0.7%) and the NSE Nifty is trading up 65 points (up 0.6%). The BSE Mid Cap index is trading up by 1.1%, while the BSE Small Cap index is trading up by 1.3%.

The rupee is trading at 68.65 to the US$.

In the news from the IPO space, as per a leading financial daily, 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.

Further, as per the news, the outlook is bullish for the rest of the year as well, with 50 companies including HDFC Mutual Fund, Lodha Developers and Rail Vikas Nigam expected to launch their initial share sales.

Of these, 28 companies are awaiting SEBI nod to launch their IPOs and 18 others have received the regulatory approval.

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 bn 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.

Meanwhile, the amount raised by SME IPOs in 2017 stood at Rs 17.9 bn. This is more than three times the amount raised in 2016. The number of SME IPOs launched also doubled from 66 to 132. This is evident from the chart below:

SME IPO Boom in 2017

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.

In other news, DB Corp Ltd share price is witnessing buying interest today. Most of the gains are seen as the company's shareholders approved Rs 3,128 million share buyback proposal.

At the time of writing, DB Corp Ltd share price was trading up by 6.7% on the BSE.

Speaking of share buybacks, the quantum of share buybacks has increased lately. 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 one of the editions 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 one of the editions of Equitymaster Insider. You can access the issue here (requires subscription).