Street signs: Auto stocks rev up, PSU shares see SLB demand, and more

Topics auto stocks | PSU shares

Getting the price right 

Investment bankers (i-bankers) are often criticized for overpricing an IPO as it leads to a bad-taste among investors. However, last week was one of the rare occasions when i-bankers have come under fire for underpricing the IPO of state-owned IRCTC, whose shares more than doubled during debt. “Both overpricing and underpricing are lapses on the part of the investment banker. Ideally, an IPO should be priced in such a way that it makes gains of between 10 and 25 per cent to investors. This makes both investors as well as the promoters diluting their stake happy,” says an industry veteran. Previously, i-bankers were criticized for underpricing the IPO of Avenue Supermarts.

The BSE Auto index, a gauge for the performance of auto stocks, gained eight per cent last week. The agreement between the European Union and the United Kingdom (UK) for a smooth Brexit lifted the stocks of companies with interests in the UK. Driven by this development, stocks of Motherson Sumi and Tata Motors gained over 12 per cent. For TVS Motor, the Q2 results came in as a major kicker, with the stock gaining 15 per cent. Analysts say that the RBI's move to further cut rates is a positive. Other stocks that had a good week include Ashok Leyland and off-road tyre-maker Balkrishna Industries.

PSU shares see SLB demand

Shares of public sector undertakings (PSUs) have been moving up the bourses. Any buzz regarding privatisation or disinvestment sends share prices of PSUs soaring. Last week, firms including Bharat Heavy Electricals, General Insurance Corporation of India and New India Assurance gained between 25 per cent and 50 per cent. Market players said savvy traders are using this as an opportunity to go short on companies that are witnessing unusual spurt in prices. “Investors have been inquiring about the availability of PSU stocks in the securities lending and borrowing platform so that they can short them,” said a broker.  

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