Month: January 2024

The number of dematerialized (demat) account additions in 2023 exceeded 31 million, driven by the rally in the markets, stupendous gains in small and midcaps, and the robust performance of initial public offerings (IPOs).

The number of Demat accounts opened with the two depositories – the Central Depository Services (CDSL) and the National Securities Depository (NSDL) — rose 28.7 percent in the past 12 months, from 108.1 million to 139.2 million. About 4.1 million demat accounts were added in December 2023, making it the highest-ever monthly addition.

“The 2023 market gave double-digit returns after a muted 2022. This rally was broad-based. All segments, including microcaps, worked. There is a tremendous amount of liquidity in retail, and their ownership of equities is rising,” said Prakarsh Gagdani, former CEO of 5paisa Capital

The benchmark Nifty50 rose 20 per cent in 2023. The Nifty Midcap 100 rose 46.6 percent and the Nifty Small Cap 100 rose 55.6 percent.

India’s macroeconomic stability, corporate earnings, and robust inflows from domestic institutional investors and foreign portfolio investors (FPI) helped the Indian markets end with gains. The US Federal Reserve’s dovish pivot and the Bharatiya Janata Party’s win in three out of five key state Assembly elections further boosted the rally.

The IPO gush was an investor lodestone. In 2023, 57 IPOs hit the markets and raised Rs 49,434 crore. Given the gains this year, investor sentiment toward IPOs has become more favorable. Brokers said many existing investors are opening new accounts for their family members to increase their chances of securing IPO allotments.

“In December there was a series of IPOs, which contributed to the demat addition. After December 3, the markets started reaching an all-time high. Even mid and small-cap indices continued to hit new highs. In such an ebullient market, demat account openings are expected to be robust, which is on the expected lines,” said Jimeet Modi, founder and CEO of Samco Securities.

Alok. C. Churiwala, the managing director of Churiwala Securities, said IPOs were the biggest catalyst for new account opening this year.

“When an investor is testing waters in capital markets, the usual way is by investing in IPOs. This year, the issues were fairly priced, and one was most likely to make money if one managed to get the allotment,” he said.

Brokers are cautiously optimistic about the outlook. At the same time, some feel the earnings momentum will sustain the gains made in 2023. Some are circumspect, considering the headwinds we must grapple with this year.

“It is going to be a volatile year. We have elections, and one needs to see whether the Fed rate cuts pan out how investors expect. We are not expecting four million accounts to open every month. We will revert to the average of 2-2.5 million monthly accounts,” Modi added.

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Markets watchdog SEBI on Friday said that institutional investors have to disclose upfront at the time of placing an order whether a proposed transaction is a short sale or not, a significant move aimed at curbing market volatility.

The Securities and Exchange Board of India (SEBI) has made certain changes concerning norms about short selling in the market.

Short selling refers to selling a stock that the seller does not own at the time of trade. Both retail and institutional investors are permitted to short-sell stocks.

Amending a circular relating to short selling issued last year, SEBI said, “The institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale”.

However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.

“The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data, and upload it to the stock exchanges before the commencement of trading on the following trading day.

“The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public every week,” SEBI said in a circular on Friday.

The circular, issued to stock exchanges, clearing corporations, and depositories, also said the frequency of such disclosures may be reviewed from time to time with the approval of SEBI.

In recent times, there have been concerns about the practice of short selling and subsequent volatility in the securities market.

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Shares of Nestle India slipped 2 percent to Rs 2,644 on the BSE in Friday’s intra-day trade in an otherwise firm market on profit booking. The stock of the packaged foods company turned ex-date for a stock split in the ratio of 1:10, wherein 1 equity share of the face value of Rs 10 was divided into 10 equity shares of the face value of Rs 1 each.

Nestle India had fixed January 5, 2024, as the record date for determining the entitlement of equity shareholders for sub-division/ split of its equity shares.

Since October 19, 2023, the stock price of Nestle India outperformed the market and surged 19 percent after the company announced a stock split. The stock hit a record high of Rs 2,770.75 (adjusted to split) on January 1, 2024.

To enhance the liquidity of the company’s equity shares and to encourage the participation of retail investors by making equity shares of the company more affordable, the company decided on a stock split, Nestle India said.

A stock split is a corporate action in which a company issues additional shares to shareholders, increasing the total shares by the specified ratio based on the shares they held previously.

Companies often choose to split their stock to lower its trading price to a more comfortable range for most investors and to increase the liquidity of trading in its shares.

Meanwhile, Nestle India has seen one of the higher growth rates among fast-moving consumer goods (FMCG) companies as it continues to benefit from distribution expansion, especially in rural India. The revenue growth is broad-based across segments and geographies.

Further sustainability of growth is expected from innovation, higher capex plans coming on stream over the next couple of years, continued thrust on RURBAN (rural and urban) strategy, and higher media investments. Nestle India has also reported strong margin performance in the quarter and will continue to focus on profitability along with topline growth. Premiumization will also be an important driver of growth and profitability improvement, analysts at KRChoksey Shares & Securities said in the September quarter (Q3CY23) results update.

Nestle India’s strong portfolio of brands and well-spread distribution network will improve product penetration and continue to support performance. Consistent demand for packaged foods and increased focus on consumer engagement initiatives are expected to support performance in the long term. However, uncertain and deficit rain remains a key negative for the stock, analysts at Geojit Financial Services said in the result update.

On commodity outlook, Nestle India, announcing Q3 results on October 19, had said that uneven rain and rain deficit are expected to impact the production of maize, sugar, oilseeds, and spices which may adversely impact pricing. Coffee continues to be volatile because of the global supply deficit.

The weather during the harvest of the Indian Robusta crop may impact production. Upcoming winter weather may impact wheat production. A healthy milk flush is expected in winter which is expected to keep prices stable, the company said.

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The Securities and Exchange Board of India (Sebi) has appointed G Ram Mohan Rao as Executive Director (ED) for three years. Rao will be handling the investigation department and the internal inspection department. He has been with the markets regulator for over 25 years during which he has supervised diverse portfolios such as inspections, litigation, recovery, investor awareness, grievance redressal, etc. Before the appointment, Rao was the regional director of the Eastern Regional Office of Sebi.

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The average initial public offering (IPO) size in 2023 shrank to Rs 867 crore from Rs 1,483 crore in 2002 and Rs 1,884 in 2021, according to a report by Prime Database. The average IPO size declined as the year was dominated by smaller-sized issues.

“The average issue size is in line with the pre-pandemic figures. In between, some issuances from new-age companies came and skewed numbers. In the next year, we will have new-age companies coming back, and the average ticket size could go up,” said Ajay Saraf, executive director of ICICI Securities.

The report said 57 companies raised Rs 49,434 crore in 2023 through IPOs, 17 percent lower than the previous year’s Rs 59,302 crore raised by 40 IPOs. However, if one excludes the mega LIC IPO, which came out in 2022, IPO mobilization increased by 28 percent from last year. The public equity fundraising (IPOs+ OFS+INVITs+QIPs) rose 59 percent to Rs 1,44,283 core in 2023 from Rs 90,886 crore in 2022.  

The largest IPO in 2023 was from Mankind Pharma (Rs 4,326 crore). It was followed by Tata Technologies (Rs 3,043 crore) and JSW Infrastructure (Rs 2,800 crore). The smallest IPO was from Udayshivakumar Infra, raising Rs 66 crore, followed by Plaza Wires, Rs 71 crore.  

Forty of the 57 IPOs came in four months of the year. September had the highest number of IPOs, with 14 issues hitting the market, followed by 11 issues in December, eight in November, and seven in August.

Forty-one out of the 57 IPOs were subscribed more than ten times, 16 were subscribed more than 50 times, and nine IPOs were subscribed more than three times. The rest of the issues were subscribed to anywhere between 1 and 3 times. The number of applications from retail investors increased to 13.21 lakh in comparison to 5.6 lakh in the previous year. The highest number of retail applications was received by Tata Technologies (52.1 lakh), followed by DOMS Industries (41.3 lakh) and INOX India (37.3 lakh).

Pranav Haldea said the IPO response was further buoyed by strong performance post-listing.

“Of the 57 IPOs, 40 gave a return of over 10 percent. 53 of the 57 IPOs are trading above issue price,” said Haldea.

Twenty-one out of the 57 IPOs that hit the market had a prior private equity or venture capital (PE/VC) investor who sold shares in the IPO. Offers for sale by such PE/VC investors at  Rs 10,968 crore accounted for 22 percent of the total IPO amount. Offers for sale by private promoters at Rs 15,196 crore accounted for another 31 percent of the IPO amount.

The amount of fresh capital raised in the IPOs in 2023 was the highest in seven years at Rs 20,662 crore.

The year also saw 87 companies filing their offer document, while 40 companies decided to let their approvals lapse.

Regarding the outlook for next year, the report said 27 companies are proposing to raise Rs 28,500 crore and are holding Sebi approval, and another 36 companies looking to raise Rs 40,500 crore are awaiting the regulator’s nod.

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