• Business Standard: Power IPOs set to cross Rs 30,000 cr mark this year

Reliance Power, which is hitting the market next week with an offering of nearly Rs 12,000 crore, will set the trend for a slew of power IPOs from other companies including Sterlite Energy (Rs 4,000-8,000 crore), JSW Energy (Rs4,000 crore), JP Associates (Rs 4,000 crore) which have already announced big share offer plans.

Other groups that are evaluating similar options include Hyderabad-based GMR Group, Patel Engineering and the Alps group.

If all these plans fructify, this year’s power IPO collections alone will match last year’s total IPO mobilisations of Rs 34,000 crore.

• Economic Times: SEBI move to scrap entry load to change business model

. . . as much as 98% of MF business at present is routed through distributors. There are over 60,000 AMFI registered distributors in the country. Besides, over 100 banks have been engaged in the distribution business.

All of them will now need to change their business model as they will not be entitled to commission if investors start investing directly.

About time!

• The News: India defers gold jewellery hallmarking law

The government has deferred implementation of a new law on hallmarking of gold jewellery to certify their purity after trade concerns that it would disrupt the world’s largest gold market.

Traders said loopholes in the law meant that either their business could slow or be disrupted in a market that accounts for 30% of world gold consumption.“There will be chaos and consumers will slow purchases as the availability will fall,” said Rajiv Popley, director of Popley & Sons, a Mumbai-based jewellery chain.

Sorry, you gotta keep buying adulterated stuff in the foreseeable future, coz the jewelers aren’t yet ready to reduce their profits.

• Seeking Alpha: Hedge Hunters (Book Excerpt)
  

The market changes Ritter foresaw are the result of two trends: in-creased interest in fuel made from corn and other agricultural commodities, and huge inflows into commodities funds from institutional investors. Both have changed the very nature of how commodities trade.

As prices have steadily risen, more pension funds and other large investors have jumped in, buying into funds run by Goldman Sachs and other large financial services firms. The investors betting on commodities these days are doing so for the long haul because they foresee huge demand coming from China and emerging markets. These huge inflows make the market much less predictable in the short term, although in the longer term, the forces of supply and demand still apply.

• Bloomberg: AIG to Start Wealth Management, Mortgage Guarantees in India

The New York-based insurer plans to enter mortgage guarantee, wealth management and distressed asset recovery businesses and infrastructure investment.

India, Asia’s third-largest economy, expects to invest about $500 billion building roads, ports and power plants in the next five years to spur economic growth.

• Business Standard: IPO roulette

Of the 85 issues listed till date in 2007, 64 ended in positive territory on day one while 54 have managed that even on current market price.

“IPOs are not underpriced, the key factor driving the significant returns post-listing is the overwhelming demand for good quality paper. There is an excess of financial resources chasing fewer value-added opportunities.”

“A failed issue is not only expensive but is also a reflection of the reputation of the company, especially with the participation of large number of institutions.”

Excess subscriptions, then, are the norm and this is largely due to the presence of qualified institutional buyers, which have at least 50 per cent of the issue reserved for them. With oversubscription comes the bane of grey markets, where issues start trading before the IPO allotment takes place.

Fairly detailed article - lists all major IPOs, lots of statistics, etc.

The number of IPOs at the NSE has slowed down quite a bit this month - there were only two listings:

• Barak Valley Cements on Nov 23, Issued at 42, Currently trading at ~56
• Religare Enterprises on Nov 21, Issued at 185, Currently trading at ~533

In the pipeline are (bidding closed):

• Edelweiss Capital
• Renaissance Jewellery
• Kolte Patil Developers
• Mundra Port SEZ

Bidding is open for:

• Kaushalya Infrastructure Development Corporation
• Jyothy Laboratories

The enthusiasm for IPOs seems to be waning along with the equity bull market.

• Business Standard: Investors lap up IPO finance

Spectacular returns by the recent initial public offerings (IPOs) on listing day are prompting a growing number of retail investors and even high net worth investors (HNIs) to borrow funds at a costly 16 to 17% (for two or three weeks) to bid for IPO shares.

The more the issue is oversubscribed the higher the interest cost per share. “Investors can make sufficient profits even if they are allotted 1/10th of the total amount invested and the scrip gets listed at a premium”.

Making hay while the sun shines.

• Economic Times: Volatility index to help price options, decide market’s course

M Venkateshwarlu has developed the implied volatility index for the Indian market based on the method similar to CBOE’s (Chicago Board Options Exchange) new implied volatility index, popularly known as VIX.

Volatility index calculation requires two pairs of options that are used from each series. Each pair consists of one call and one put with the same strike. In total, eight options must be used. The implementation of the method assumes a very liquid market. These constraints may not be met in emerging options markets that are less liquid than CBOE.

. . . this may introduce severe biases in the construction of the implied volatility index since it is well documented that the implied volatilities of calls and puts may differ significantly. In construction of implied volatility index for the Indian market also, we have observed some of the limitations similar to the one mentioned above.

Option liquidity in India is horrible. Forget about mid & far-month options, even the current month options for most stocks are rarely traded.

• The Motley Fool: Building a Better Index Fund

The MSCI index is weighted by the traditional market capitalization method, favoring widely held and highly valued companies like BHP Billiton (NYSE: BHP), with a $220 billion market capitalization. Because it doesn’t include the business fundamentals of its selected companies, one criticism of this method is that it biases the index toward overvalued companies and away from undervalued ones, thus raising the risk of capital loss in a downturn.

In contrast, the innovative methodology of WisdomTree’s index is that it includes only companies that are paying regular cash dividends. Relatively mature, slow-growing companies tend to be the ones that pay regular dividends.

Yet another investment avenue that’s not received enough attention in India. For eg, how many people take advantage of low-load index funds or ETFs like the Nifty BeES?

The number of IPOs at the NSE hasn’t kept pace with the market indices, but except for one, all the listings have done well:

What’s interesting is there is not a single IPO in the pipeline! This means that even before last week’s P-Note whammy, there was no company interested in taking advantage of the mo-mo market.

• Business Standard: Day trading sneaks into primary market

Day trading, which is predominantly a secondary market phenomenon, has made a back door entry into the primary market as well through the grey market route.

Take for instance, Power Grid Corporation, which will be listed next week is already being traded in the grey markets in Ahmedabad and Rajkot at a premium of Rs 24-25 a share. In day trading, transactions are squared off on a daily basis . . . The share was considered ideal for day trading as it is a public sector company and hence the promoters are not active in the grey market.

• Hindu Business Line: Sensex zooms, but no spurt seen in new demat accounts

The rise of the benchmark Sensex from the 14000 range in January this year to the 17000 range currently, does not appear to have roped in any more retail investors than normal, if the number of new demat accounts are anything to go by.

Monthly gross additions to demat accounts at National Securities Depository Ltd have been averaging 1.25 lakh for some time now . . . at Central Depository Services Ltd (CDSL), monthly additions have been averaging 1 lakh.

“It must be noted that the current market rally has been entirely led by FIIs. Domestic financial institutions, as well as the retail segment, have been net sellers”.

• Sucheta Dalal: Giddy journalism without any check posts

In the last couple of months, several newspapers have chosen to rediscover Mr.Madhukar, a former Whole Time Member (WTM) of the Securities and Exchange Board of India whose sole claim to fame was an embarrassing foot-in-the mouth prediction. On 19 August 2005, when the Sensex was 7780, Madhukar got so carried away while making a speech at the Bombay Stock Exchange (BSE) that he loftily predicted that the Sensex would touch 16000 in the next few months – in fact within the calendar year.

Exactly two years later, in a dramatically altered economic scenario, when the Sensex finally crossed 16000, we have breathless young reporters, dubbing Madhukar the ‘desi Nostradamus’ and hailing his ridiculous hyperbole and colossal indiscretion as a prescient prediction.

Both IPOs that listed on the NSE this month are doing well - especially given the lackluster performance of the market indices:

Indowind, which saw QIBs pull out at the last minute, has doubled since its listing late last week! The one major impact has been in the quick slowdown in new issues.

Coming Attractions:

• Power Grid Corporation of India Ltd.
• Consolidated Construction Consortium Limited
• Koutons Retail India Limited

After 12-13 IPOs each in July & August, the current IPO pipeline at the NSE has dried up:

There is 1 open issue: Kaveri Seed Company Limited,

only 3 where bidding is closed & they are to be listed:

• Motilal Oswal Financial Services Limited
• Indowind Energy Limited (most likely a fiasco)
• Magnum Ventures Limited

and 3 to open for bidding:

• Kaveri Seed Company Limited
• Dhanus Technologies Limited
• Power Grid Corporation of India Ltd.

Indowind IPO hit by QIB exodus

The IPO had attracted a bidding of about 1.3 times just before the offer closed on August 24. But, a sudden bout of withdrawals resulted in a fall in subscription to below 90% as the bidding was coming to a close, which raised concerns, particularly among retail investors.

Merchant bankers believe small investors are being misled by the initial ‘positive’ response from QIBs, who can spoil the equation if they opt to withdraw.

One case where access to data can be damaging. The next time, ignore the QIB data while trying to figure out whether to speculate.

Inspite of the fast & furious bounce-back in Indian market indices, the IPO scene isn’t all that pretty. After the poor showing by Purvankara yesterday, today we have a withdrawal by IT People:

As you can see above, it was severely under-subscribed. This is a bit surprising though: if you look at August month IPOs, they have performed quite well, with double-digit gains on average.

Only 4 out of 13 IPOs are in the red - not bad given what the market went through this month.