Sensex Hits A New All-Time High; HDFC AMC Makes A Strong Debut

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.5% while the Hang Seng is up 1.1%. The Shanghai Composite is trading down by 0.3%. US stocks advanced on Friday as upbeat earnings helped investors shrug off heightened trade anxieties and weaker-than-expected July jobs growth.

Back home, India share markets have opened the day on a strong note. The BSE Sensex is trading up by 223 points while the NSE Nifty is trading up by 62 points. The BSE Mid Cap index opened and BSE Small Cap index both opened the day up by 0.6%.

The rupee is currently trading at 68.79 to the US$.

All sectoral indices have opened the in green with realty stocks and automobile stocks witnessing maximum buying interest.

In the news from the finance sector. HDFC Asset Management Company, which recently concluded its public offer, has made its stock market debut today.

HDFC AMC's Rs 28-billion initial public offer was open during July 25-27. The price band for the offer was fixed at Rs 1,095-1,100 per share.

You can read our Co-head of Research, Tanushree Banerjee's IPO note here...The IPO was of 25,457,555 shares, including anchor portion of 6,653,265 shares. HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

With buoyant capital markets and the mutual fund industry on a roll, AMCs are eager to hit the market with their IPOs.

With HDFC AMC's IPO hitting the markets, many are expected to follow HDFC AMC. This opens up an entirely new segment for investors.

The first mover in this race was Anil Ambani promoted Reliance Nippon Life Asset Management Company that came up with a Rs 15.4 billion offering in October last year.

Interestingly, UTI AMC has also announced plans to list this financial year.

The AMCs' plan to go public follows a growing trend where banks and financial services are looking to unlock value in group businesses after the rapid rise in stock markets.

Also, apart from AMCs, another segment that's grabbing attention is brokerage houses.

Is India Moving Towards Financialization of Household Savings?

So, how can you profit from this financialization trend in India? And how should you think about these IPOs? Are valuations worth it? Is the opportunity of a lifetime or the dud of the decade?

These are the questions that will require much more contemplation. But don't worry - our research team is on it.

We at Equitymaster 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.

The HDFC AMC share price rallied over 50% in the opening session.

Moving on to the news from textiles sector. As per an article in a leading financial daily, the government is likely to hike import duty on about 300 textile products to boost domestic manufacturing and create employment opportunities.

Reportedly, foreign direct investment (FDI) norms for the sector may also be relaxed. Products on which imports duties are expected to increase includes some fabrics, garments and man-made fibers. The duties could be enhanced to 20% from the current level of 5-10%.

Increase in duties would give an edge to domestic manufacturers as the imported products are relatively cheaper. Increase in manufacturing activity will help create jobs in the sector, which employs about 105 million people.

In July, the government doubled import duty on over 50 textile products, including jackets, suits and carpets, to 20%, a move that is aimed at promoting domestic manufacturing.

The imported products, which have become expensive include woven fabrics, dresses, trousers, suits and baby garments.

Imports of textile yarn, fabric, made-up articles grew by 8.6% to US$168.6 million in June.

However, exports of cotton yarn/fabrics/made-ups, handloom products grew by 24% to US$986.2 million. Man-made yarn/fabrics/made-ups exports grew 8.5% to US$403.4 million. Exports of all textile readymade garments dipped by 12.3% to US$13.5 billion.

Textile stocks opened the day on a mixed note with Himatsingka Seide and Pioneer Embroideries leading the pack of gainers.