Asian share markets slipped today amid reports that Washington was about to announce a new round of tariffs on Chinese imports, setting the stage for possible reprisals by Beijing. US stocks ended little changed on Friday as financials rose with bond yields.
Back home, India share markets have opened the day on a weak note. The BSE Sensex is trading down by 323 points while the NSE Nifty is trading down by 88 points. The BSE Mid Cap index and BSE Small Cap index opened the day down by 0.6% & 0.3% respectively.
Sectoral indices have opened the day on a mixed note with healthcare stocks and information technology stocks witnessing maximum buying interest. While, bank stocks and consumer durables stocks opened the day in red.
In the news from the economy. A day after announcing a set of measures to boost short-term capital inflows into the country to rein in rupee depreciation and curb rising current account deficit (CAD), finance minister Arun Jaitley on Saturday sent a strong signal of fiscal prudence by committing to the fiscal deficit as well as capital expenditure targets.
Jaitley's commitment to maintaining the budget targets in a pre-election year also in a way rules out any cut in excise duty on petroleum products which have been rising keeping in pace with international crude oil prices.
Further, Jaitley's comments came after an internal review meeting of all the departments of the finance ministry chaired by Prime Minister Narendra Modi in New Delhi on Saturday. Jaitley said Modi expressed satisfaction about the broad parameters of the economy.
Arun Jaitley said that the government will be able to meet both direct tax, indirect tax, and non-tax revenue targets for the fiscal year, adding that collections from the Goods and Services Tax (GST) would go up with an increase in consumer demand.
After a meeting on Friday, the government decided to relax norms for overseas borrowing and impose restrictions on non-essential imports. Jaitley said these moves will help check the current account deficit as well as increase foreign exchange inflows, without specifying which items would face import restrictions.
The meeting came as the prices of petrol and diesel continued to rise due to the recent depreciation in the rupee's value and a rise in international oil rates. While crude oil prices have been around the US$80 per barrel mark, the rupee declined against the dollar this week, making imports costlier.
Speaking of crude oil, the chart below shows India's crude oil and petroleum products import bill for the period April to July over the last four years.
Crude Oil Bill Jumps 56% in 2018
You can see that the crude import bill was substantially lower in the April-July period of the previous three financial years. In the latest financial year, however, the import bill has shot up 55.6% year-on-year.
And it is hardly any wonder that the rupee has been tumbling lower and it currently at a life-time low against the US dollar.
Given we're in an election year, it will be interesting to see how the government responds to these economic shocks and how market participants react in the stock markets.
Moving on to the news from the IPO space. State-owned engineering and construction company IRCON International will open its initial public offering for subscription today with a price band of Rs 470-475 per share.
This would be the 9th company coming out with public issue in current financial year 2018-19 while it would the second company from Government of India coming out with IPO under divestment programme.
Equity shares are proposed to be listed on BSE and NSE. The public issue comprises an offer for sale of 9.9 million equity shares by its promoter, The President of India, acting through the Ministry of Railways, Government of India.
Meanwhile, Shri Bajrang Power and Ispat, the flagship company of the Goel Group of companies, has filed draft red herring prospectus with capital market regulator for initial public offering of Rs 5 billion.
The net issue proceeds will be utilized towards repayment of certain borrowings and for General corporate purposes.
With so many IPOs set to hit the markets, 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.
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