Eleven companies have launched their initial public offerings (IPOs) in December 2023, making this month the second-best December for public offerings since 1996. Collectively, they are raising Rs 8,182.7 crore this month. In December 2021, 11 companies raised Rs 9,534 crore. However, excluding December 2021, this month marks the best December for IPOs since 1996.
The benchmark Nifty and Sensex could see another 8-10 per cent from the current levels, said HDFC Securities in its outlook for equity markets in 2024. The brokerage said that the market movement in the next year will not be linear, and there will be more volatility. When asked about the market reaction to the General Elections in 2024, Dhiraj Relli, managing director and CEO of HDFC Securities, said more than the outcome of the elections, the market movement in the next three to four months will decide the market trajectory post elections.
A combination of strong earnings and economic growth, and hopes of the Federal Reserve ending the rate-hike cycle have pushed gross buying of Indian equities by foreign portfolio investors (IPO) to a new high. In 2023, FPIs have been gross buyers of shares worth Rs 25.5 trillion, the highest ever in a calendar year. FPIs also sold shares worth Rs 23.9 trillion. On a net basis, they were net buyers to the tune of Rs 1.6 trillion, the highest since 2020.
Going 'long' is becoming an overcrowded trade on Dalal Street, and any negative trigger could lead to a sharp correction, warn experts. However, given the strong momentum, particularly in IT stocks, the downside could be protected in the immediate term. "With the Nifty50 surging to new life-time highs, the bulls remain in control. Further upsides are likely once the immediate resistance of 21,492 is taken out.
The gap between market capitalisation of Hong Kong and India has dwindled significantly. At present, India's market cap stands at approximately $4.3 trillion, while Hong Kong's is around $4.7 trillion. In the depths of the Covid-19 crisis in March 2020, Hong Kong's market cap, at $4.6 trillion, was 3.44 times larger than India's.
More than half a dozen companies will hit the market with their initial public offerings (IPOs) between now and the end of next week. The cumulative amount raised from these IPOs is expected to be around Rs 8,000 crore. Stationery products firm DOMS Industries and home financier India Shelter Finance's IPOs - of Rs 1,200 crore each - got off to a flying start on Wednesday (December 13), with the former garnering over six times the subscription and the latter getting 1.5 times subscribed.
'The deal pipeline across products is robust for 2024.'
Fundraising through qualified institutional placement (QIP) has revived this year, led by commercial banks, after a lacklustre 2022. According to data compiled by Prime Database, Indian companies have raised Rs 53,070 crore in 2023 so far, of which seven banks - Union Bank of India, Indian Bank, Bank of India, Federal Bank, IDFC First Bank, Bank of Maharashtra, and J&K Bank - account for Rs 21,290 crore, or about 40 per cent. If other financial institutions are included, the figure surges to Rs 26,690 crore.
After a sharp rally in the equities market this year, investors could be better off rotating some funds towards the debt market. Experts believe several tailwinds could spur bond market returns over the next 12-18 months. These include India's robust macroeconomics, declining inflation, and the imminent passive flows of close to Rs 2.5 trillion on account of domestic sovereign bonds getting included in the JP Morgan global indices.
Global private equity (PE) firms are successfully offloading large equity stakes in domestic companies in the open market, taking advantage of buoyant conditions. Strong domestic liquidity support and an upward trending market have underpinned over a dozen PE exits worth $2.5 billion, data compiled by Business Standard shows. The figures exclude PE exits during maiden share sales and shares sold by strategic investors, such as SoftBank and Ant Group in new-age companies.
The National Stock Exchange (NSE) of India is going to indefinitely defer the internal deadline set for extending trading hours, according to sources in the know. The exchange aimed to introduce a three-hour evening session exclusively for index derivatives by March 2024, contingent upon regulatory clearance from the Securities and Exchange Board of India (Sebi). Sources indicate that the market regulator has not provided a favourable indication, dimming optimism surrounding the proposal.
'A key reason for the strong interest in IPOs has been an increased focus on profitability and reasonable pricing of deals.'
The domestic equity markets are expected to extend gains following the strong showing of the Narendra Modi-led Bharatiya Janata Party (BJP) in the state elections - a crucial precursor to the general elections in May. The BJP decisively secured victories in three of the four key states - Madhya Pradesh, Rajasthan, and Chhattisgarh. While the battles in these three states were closely contested, the scale of the BJP's triumph has surprised many, heightening expectations for regime continuity in 2024 - a positive catalyst for the markets.
Higher valuation creation in companies beyond the top 100 has given the domestic markets a shot at a $4 trillion market capitalisation (mcap) - a club exclusive to three countries currently. On November 23, the mcap of all BSE-listed stocks finished at a new record of Rs 328.33 trillion ($3.94 trillion), despite the benchmark indices ending with losses. The mcap was propelled by gains in the broader market, including small and midcap stocks - a trend dominant this year.
The Federal Retirement Thrift Investment Board's (FRTIB), one of the US government's main retirement funds, decision to change the benchmark index for gaining international exposure will channel $3.6 billion (Rs 30,000 crore) inflows into domestic equities. India has a weightage of 5.3 per cent, seventh-most in the new MSCI ACWI IMI ex USA ex China ex Hong Index, which FRTIB now plans to use. India isn't part of the current developed markets-dominated MSCI EAFE index that the pension fund uses.
India Inc's net profit as a percentage of the country's gross domestic product (GDP) is just shy of reaching 5 per cent, bolstered by strong earnings growth in the second quarter of 2023-24. Analysts interpret this as an indication that a corporate profit upcycle is in progress, with projections suggesting that this share could exceed 8 per cent within the next five years, driven by bullish earnings growth expectations. "We believe we are only halfway through a profit cycle, with the profit share in GDP rising from a low of 2 per cent in 2020 to about 5 per cent currently, and likely heading to 8 per cent in the coming four to five years. "This implies about 20 per cent compounding of earnings growth. "Underscoring this forecast is the start of a new private capex cycle, under-geared balance sheets, a healthy banking system, lower corporate tax rates, improving terms of trade, and structural consumption demand outlook albeit somewhat offset by likely consolidation in government deficit," said Ridham Desai, managing director, head of research, Morgan Stanley India in a note.
Her reasoning is simple, "It's a Tata company. No shareholder will let go of this opportunity," she told Business Standard. When asked if the other reason for lining up for the IPO is the technology sector and the fact that the combination of Tata and tech is happening after almost two decades, she replied: "The name of the company and the group matter. Tata means stability and credibility," she added.
The benchmark National Stock Exchange Nifty has rallied 4 per cent, or 750 points, from this month's low to end at 19,732 on week ending November 17. Technical analysts say the market could consolidate around the current levels as it is nearing the resistance zone. "The near-term uptrend status of the market remains intact, but there is a possibility of some more consolidation or minor weakness for the Nifty in the next one to two sessions.
The Indian equity markets have significantly increased in importance within the emerging market (EM) basket of stocks in recent years. Since 2018, India's weighting in the Morgan Stanley Capital International (MSCI) EM Index - tracked by passive funds with assets of nearly $500 billion - has doubled, while the number of domestic stocks has grown by almost 70 per cent.
Equity markets rallied after softer-than-expected inflation data in the US and UK rekindled hopes of the end of the rate-hiking cycle by major central banks. The soft inflation reading drove down bond yields and the US dollar, whetting the appetite for risky assets. The 10-year US bond yield fell below 4.5 per cent after topping 5 per cent less than a month ago.
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