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In an off-cycle meeting, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) today decided to hike the policy interest rate by 40 basis points, taking the repo rate to 4.4%. Announcing the decision, RBI Governor Shaktikanta Das also announced a 50 basis point increase in Cash Reserve Ratio (CRR), which he said would result in the withdrawal of liquidity worth Rs 87,000 crore. The move forced domestic benchmark indices lower with Sensex and Nifty tanking more than 2% each. Investors were also left wondering how the RBI move would impact their investments in the LIC IPO, which opened today.
Market experts, however, see little to no impact on investments LIC owing to the interest rate hike. Analysts believe LIC IPO’s attractive valuation and the fact that it has been in the offing for years now will keep the issue steady. “Today’s move is unlikely to impact investor interest in LIC IPO as the government has priced the issue at an extremely attractive valuation and many foreign and domestic Institutional Investors would like to own a global Insurance behemoth that has a nearly two-thirds market share in one if the fastest-growing emerging markets,” Ajay Bodke, Independent Market Analyst, told FinancialExpress.com.
LIC IPO was subscribed 0.51 times at the end of the day’s trade on Dalal Street. Investors can bid for the issue till 7 PM. Policyholders of LIC have already oversubscribed their portion, bidding for 1.69 times the reserved quota. Qualified Institutional Buyers (QIB) quota was subscribed 0.03 times while the Non-Institutional Investor (NII) portion was bid for 0.22 times and the Retail quota was subscribed 0.52 times. Employees of LIC have bid for 0.90 times their portion.
LIC’s public issue is the largest ever to hit Dalal Street at Rs 21,000 crore. The previous largest issue was that of One97 Communications (Paytm), which has performed poorly since listing. However, analysts believe LIC will buck the trend. Vishal Wagh of Bonanza Portfolio told FinancialExpress.com that LIC has been priced at very attractive levels, nearly half of what was proposed earlier and is at a discount to peers, making it more appealing.
Similarly, Ajit Mishra, VP – Research, Religare Broking, said that LIC IPO has been in the offing for quite a while now and investors were already counting that in. “This has been there for a year now and we have seen interest in the issue so far,” he added. Talking about what forced Dalal Street lower today after Shaktikanta Das’ statement, Ajit Mishra said that it could have been a knee-jerk reaction owing to the off-cycle nature of the hike.
“The market is on the verge of bottoming out near 16604 levels. There is an exhaustion gap near to 16414-16447 which normally does not get filled in case of reversal,” said Vishal Wagh. He added that domestic markets have set the tone for a bottom and could head northward soon.
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