Should You Subscribe to Capillary Technologies IPO? – Full Analysis & Review

In the first two months of the current fiscal year, India INC is likely to see a sharp growth in overseas borrowing, by creating a new record as many companies opt for fundraising in the coming months amid a sustained period for durable project financing.Also, we are ready to cross a record of fundraising which is approximately 20 billion more than the country witnessed in 2019; said Chetan Joshi, the managing director and head of debt finance.Last year, India Inc invested USD 1.39 billion in overseas ventures. However, every month, the investment amount got down by 58% from USD 6.71 billion in May 2021, according to the RBI data on outward investment in Indian firms. If you look at the total investment during June 2021, USD 1.17 billion was issued in the form of a guarantee, whereas USD 1.21 billion was given a loan. The equity trading investment stood at USD 426.84 million. Major investors such as Tata steel owned a subsidiary worth USD 1 Billion in Singapore; WIPRO USD 787.5 million in a fully-owned unit in the US.Reliance Industries have invested USD 56 million in agriculture and mining based WOS in Singapore, Interglobe Enterprises invested USD 51.5 million in a joint venture in the UK.

An Overview

According to the latest RBI figures, gross FDI inflows more than doubled to $18.3 Billion in April-May in 2021 as compared to the last year which was 8.5 billion dollars. However, more than one-third of the inflows is available in the form of the stock purchase rather than new project investment. Nevertheless, the inflows help to boost the country’s foreign exchange reserves. It may be noted that stock acquisitions are not traded on a stock exchange. They generally include private equity investment, pre-IPO equity investment or a massive purchase of more than 10% of a firm’s dissolved equity by M&A transactions.

Further Key Takeaway

Last year multiple firms attempted to raise funds either privately or publicly to prepare for a pickup demand this year. Market observers give credit to the investors who started the preparation of major giants such as Zomato SME IPO and others. Many people believe that it is a part of a larger pattern. According to RBI’s foreign investment data, inflows through the purchase channel were at least half a billion dollars in eight of the eleven months between 20 July and 21 May. Such things attract long term foreign exchange reserves. The total of these inflows in $ 6 billion in the month of May alone. RBI has stated this as a common Foreign Direct Investment trend, with share purchase deals dominating. It has increased market intervention as evidenced by its foreign exchange reserves. Even though the foreign portfolio investors withdrew $1.5 billion from India and the demand of the dollar price continued to rise because of higher imports, India’s foreign exchange reserves went up by $ 19 billion in April-May.As per the recent United Nations Conference on Trade and Development, India has emerged as the most active destination for FDI and was among the top five countries that attract FDI in the past years.

Are FDI Inflows a Good Sign?

Due to the fall of economic statistics resulting from the shrinkage in the economy; one set of data that grabs everyone’s attention is: data on Foreign Direct Investment inflows into India. Total FDI inflows in the first nine months of FY 2020-21 were greater than $ 67.5 billion, which was $ 12 billion in FY 2019-20. This means that the inflows during FY 20-21 would have surpassed the record figure of $ 74.9 billion in 2019-20.Equity inflows gave rise in FDI inflow as the inflow increased about $51.5 billion in April-December 2020-21 from $ 37.8 billion in the last fiscal year. This shows that the equity inflows increased by more than 36%.These figures appear to be so optimistic, given that they were released during the most devastating downturns recorded in the world economy. If you try to understand the significance of these inflows, the two questions that investors must ask are: How much FDI helps in revitalizing the Indian economy by enhancing the production capacity? Secondly, will these inflows take part in the government’s initiatives ‘ the Atmanorbhar Abhiyan’ which was announced after the first pandemic to help the manufacturing sector overcome the losses? The FY 20-21 was particularly significant since it featured the selling of Reliance Industries equity to overseas investors. As the pandemic attracted some of the headlines about its strategic alliance with some significant foreign corporations, the data available allow us to place the Reliance deals in India’s overall FDI overflows. Apart from the Reliance transactions, you must consider the patterns of FDI inflows from April to December 2020-21 are consistent with the GOI’s development programs. Keeping this in mind, the Atma Nirbhar Abhiyan, which is the highlight of the manufacturing sector, should be given priority. As per the government, FDI is one of the important ingredients for implementing this agenda. FDI data shows that despite the government’s inflows from April to December 2020-21; this sector received only 13% of the total. The services sector grabbed almost 80% of the total inflows with the IT sector accounting for 47% of the total inflows. This is not surprising, considering JIO platform activities are classes as other IT and computer service activities by the RBI. Aside from the services, wholesale and retail commerce were the most important industries.

Conclusion

The rise in cash holdings under the circumstances of the pandemic and its impact may not be worrisome for investors as corporates may be looking at conserving cash for any potential growth opportunities shortly.

When it comes to investing, the primary thing that one should confess is that nobody is perfect. People who invest a lot often go through wins or losses. However, some of the mistakes people usually make when trading stocks are pretty common. The majority of investors make such mistakes.

The important thing to figure out is that these silly mistakes can be avoided simply through awareness.

Several figures need to be taken care of while investing in the stock market. Before that, you should clearly understand what you are investing in, take your time, and select a path that suits your financial goals and risk appetite.

It may be noted that every investor’s risk appetite is different from the others and so are financial goals. Therefore, one should plan an investment strategy to maintain its risk appetite and time constraints.

In this blog, we will discuss some of the common mistakes to avoid while investing in the stock market:

1. No Diversification

Diversification of a portfolio allows you to separate all the securities in different investment sectors i.e. asset classes such as commodity, shares, bonds, property and more.

Make sure that their portfolio should not include 10% in any of one fund. In this case, mutual funds offer a convenient way to diversify your portfolio, the fund manager of a mutual fund often invests in several stocks from different industries.

With the help of diversification, investors can spread out their investments in multiple mutual funds.

2. Lack of Research

Before you start investing, it’s always good to do proper stock market research as it will help you to get good ideas about investing. You may start searching on the internet as there is a lot of information available on the internet. However, you are required to figure out the right investment advice.

Also, you need to make a decent plan. For instance, if investor x wants to invest in the securities that would give him a decent return by the time he retires. But if Y investor wants to invest in such types of instruments which can give him a good return within the span of 7 to 10 years.

As both the investors are different, so are their financial goals. Therefore they need to make a different plan.

3. No Portfolio Rebalancing

As time passes, the portfolio should be reviewed periodically. You do not need to forget that different asset classes will vary over time with some investments going faster in values as compared to others.

Also, the world doesn't stick to one place. Economic activities change, personal circumstances change and so should the portfolio of an investor.

4. Timing the Market

If you have enough knowledge about the stock market and try to attempt to time the almost futile market. You may be surprised that even experienced investors fail to time the market. Instead of timing the markets, investors should focus more on long term investment as with the passing time the volatility in the stocks also gets minimized.

5. Procrastination

Procrastination is a bad word for investors. Investors who want to achieve big share trading returns from the stock market should be active throughout their lives. In case, if an investor commits a mistake, the primary thing they need to do is to pay attention to their mistakes, closely monitor them on time and get out from the poor investment.

6. Excessively High Expectations

Many investors start their investment carriers thinking that they would make huge returns against the investment they make and surpass the market performance. Many of them believe that they invest Rs 100 into the stock market and make Rs 1000 investment overnight.

7. Follow the Herd Mentality

Following a herd mentality is one of the biggest mistakes investors often commit whether they are experienced or novice. A bullish stock market brings confidence to many investors; they often get influenced by the people when they see the gains others are making.

This result is investors ended up investing when the market is at its peak. Therefore it is advised to ignore the short term gains and try to focus more on long term investments.

Just check out your past performance, try to analyze the pattern a particular stock follows, learn from the mistakes and make a move. Also, it is important to not take any important decisions based on it.

Takeaway

Making a mistake in stock trading is very common. Intelligent investors who have a clear understanding of the stock market, also commit big mistakes sometimes.

However, the thing that makes them different from normal investors is that top-notch investors learn more from their mistakes without wasting time and make the next move carefully.

When it comes to investing, the right advice from the right people is very important. Experienced investors often take advice from prestigious stockbroking houses and include advice in their research. This, in turn, makes them more aware of making informed decisions.

The new delta variant of Covid 19, has gained much attention these days, as it is heavily spreading across numerous countries worldwide. The new variant, identified in India, is already spread in the U.K. and is growing rapidly in other services including Italy, France, and Germany. On Wednesday, The WHO said that the new variant has been detected in 96 countries while the Department of Disease Control and Prevention in the US called this variant a matter of concern as of June month, it accounts for 20% of all US cases. A handful of emerging market currencies have achieved many profits as compared to dollars this year. However, you may see the list may shrink as the excessive contagious delta variant heavily impacts the economies of developing countries. According to Credit Agricole CIB, countries that are already lagging in the vaccination rates may feel the pressure because they have already put restrictions that may hurt the economic activities of developing nations like South Africa. The best performers of 2021, the rand and rubble, were among the first that knocked an index of emerging market currencies lower in June for the first time in three months. Sebastien Barbe, the head of emerging market strategy at Credit Agricole, said that the achievement in terms of vaccination will be a differentiation factor among emerging markets in the second half. The impact of the further spread of this delta variant will significantly vary on the vaccination rates, and several economic and political factors, he added. Both the South African rand and Colombian Peso are currently experiencing the pain from a spike during the Covid 19 cases, which is keeping expectations for tiger monetary policy at bay. It also affected their economies: strict restrictions drastically affected African economic activities, Colombia, on the other hand, decided to postpone the plan to raise taxes to combat the crisis generated from the new variant.As per Al-Hussaini, a senior interest rate and currency analyst, the currencies of South Africa and Columbia, the weaker as compared to other countries. This is because the central banks of South Africa and Columbia have failed to hike interest rates so that they can build up a real rate cushion against the U.S.He further said: the prospect of higher fiscal spending and the risk of global outflows post-yield-hungry global investors flocked to the nations’ assets this year.If we compare the former two countries with Brazil and Mexico, then the peso will be more flexible because they kept their bank policy more strict than other countries.The real has outperformed all the developing nations even as the Covid 19 cases remains high. The consistent spread of new variant strain on Southeast Asia. MUFG Bank Limited expects a slight decline in the tourism revenue on Thailand’s baht.At the same time, Indonesia’s rupiah experienced a drastic fall since April, as the country imposed the strictest curbs yet on the economic centres of Java and Bali.

Deepening Divisions

Only a few developing nations - Chile, Israel, China and UAE and Central Eastern European countries - have successfully vaccinated half of their populations, which gives us an idea to control the spreading of the Delta variant," Bank of America Corp. said once in a report last Friday. Most major emerging markets should get there by year-end that includes Indonesia, Mexico, Turkey, Brazil, India said David Hauner, head of cross-asset strategy at Bofa. South Africa is the outlier, as only 5% of its population is vaccinated. As per the current situation, it would take around 2023, for the nation to reach 50%. In Columbia, approximately 11% of the total population gets vaccinated - a lower proportion than Chile, Brazil and Mexico. Economic data bears out the division: purchasing managers’ indexes in Russia and South Africa, along with those in Asian regions with relatively low vaccination rates, fell in June. Those in Eastern Europe and Latin America, where vaccination programs are more advanced, mostly rose.This may put pressure on developing-nation central banks to remain accommodative, another negative for the currencies because the federal reserve has discussed the withdrawal of stimulus.As it could heavily create the distance between emerging and developed markets.Many industrialized nations such as the U.K. continue to struggle to combat the virus despite having tight restrictions and ease of vaccine availability. Hence, the latest surge in infections in many developing countries is not driven by the new strain which in turn said that outcomes could be far worse now.Copenhagen based senior macro strategist, Witold Bahrke said: "We are watching the resurgence of infection numbers closely. It is one of the factors that lead us to EM currencies, mainly due to its potential impact on the growth of EM-DM.

Status Quo

Central bankers in Peru, Poland, Malaysia, and Romania are requested to keep borrowing costs at their current levels. Romanian policymakers are advised to keep the nation’s benchmark rate at 1.25%. The leu has slumped 4.2% in 2021.Another day, Malaysia’s central bank is requested to hold its policy rate at a record low of 1.75%, thus maintaining an accommodative stance after the government announced a new fiscal package worth $36 billion last week. On Thursday, Peruvian policymakers expected to keep the country’s benchmark rate at a record low of 0.25%. However, they might take a more cautious tone in their statement after a higher than expected inflation last week.

Inflation Clues

Inflation is due from countries like Thailand, the Philippines and Taiwan on Wednesday. On Friday, China is all set to publish gauges of consumer and producer price inflation. According to Bloomberg's intelligence report, China’s PPI may cool from a 13 month high of 9% in May due to the price fall of metal ore and coal. Taiwan will soon post foreign reserve data on Monday, followed by Indonesia, China, and Malaysia. On Thursday, Thailand will submit foreign reserves data to the respective authorities.

पिछले सप्ताह सोना एक हफ्ते के निचले स्तर पर पहुंच गया। मजबूत डॉलर और बढ़ती जोखिम की क्षमता के बीच बढ़ते कोवीड -19 मामलों पर चिंता कम हो गई जिससे निवेशकों के लिए सोने की सेफ हेवन अपील को कम कर दिया है। बढ़ते शेयर बाज़ारो में भी डेल्टा संस्करण की चिंता को नज़र अंदाज़ कर दिया और जोखिम की तरफ निवेशकों का रुझान बना।सोने की कीमतें दबाव में हैं क्योंकि डॉलर अब तीन महीने के उच्चतम स्तर के आसपास मँडरा रहा है और शेयर बाज़ारो ने दूसरे दिन भी तेज़ी को बरक़रार रखा जिसका अर्थ है कि व्यापारी कोवीड -19 चिंताओं को दूर कर रहे हैं और पुनः मुद्रास्फीति बढ़ने की स्थिति बन रही है। लेकिन यूरोपियन सेंट्रल बैंक की बैठक के बाद सोने और चांदी में निचले स्तरों से सुधार देखा गया है।जिसमे उन्होंने अपने नीतिगत फैसले को सौंपते हुए ब्याज दरों को रिकॉर्ड निचले स्तर पर और भी अधिक समय तक बनाए रखने का वादा किया और मुद्रास्फीति पर माध्यम अवधि के लिए अपना नजरिया लक्ष्य के निचे रहना बताया।अमेरिका के आर्थिक आंकड़े पिछले सप्ताह कमजोर दर्ज किये गए और बांड यील्ड में भी निचले स्तरों से उछाल दर्ज किया गया जिससे डॉलर इंडेक्स में मजबूती रही और सोना-चांदी में बढ़त सीमित हो गई।इस सप्ताह अमेरिकी फ़ेडरल रिज़र्व बैंक की बैठक, सोने और चांदी के भाव के लिए एक महत्वपूर्ण ट्रिगर होगा। घरेलु वायदा सोना पिछले सप्ताह 2 प्रतिशत टूट कर 47600 रुपये प्रति दस ग्राम पर रहा। चांदी में 1.5 प्रतिशत की साप्ताहिक मंदी दर्ज की गई है।

तकनीकी विश्लेषण

‍इस सप्ताह सोना और चांदी के भाव में निचले स्तरों से उछाल आने की संभावना है। सोने में 46600 रुपये पर सपोर्ट है और 48000 रुपये पर प्रतिरोध है। चांदी में 66000 रुपये पर सपोर्ट और 68400 रुपये पर प्रतिरोध है।

Stock market on the one hand ropes in fundamental capital required by the companies and on the other hand it allows the buyers to enjoy ownership in businesses with the potential of availing gain in dividends form which would be in accordance with the company’s future performance. Therefore, it can be referred to as the core of the economic system.

Trading on equity with the purpose of investing is buying and selling company stock shares. The shares of distinct publicly traded companies are traded via a stock exchange or over the counter markets. Trading on Equity is a kind of trade-off. The firm makes use of its financing of debt or equity to buy new assets. In turn, it makes use of its new assets to pay for or finance its debt and equity obligations.

Trading on equity is carried out on two markets viz. The primary or the main markets – whereby new issues are first offered. The secondary markets – whereby subsequent buying and selling takes place.

Many buyers who assume common stock are too unstable are fascinated by the advantages of preferred shares. Depending on the company issuing preference shares is considered to be a good option rather than taking on greater debt.

With equity investors, there are no interest obligations and relying on the classification of shares being issued dividends don’t have to be paid annually. This approves the enterprise to reap the capital of which it wishes to increase besides on the spot money outlays for interest. It additionally provides the business enterprise time to make earnings with the new assets.

OBJECTIVES

• It is a means to raise fixed cost capital which is the combination of borrowed capital and preference share capital retaining equity share capital as the base to facilitate an increase in earnings of equity shareholders.
• It is when the organization is in contrast to the value of the interest of the debt.
• Incurs new money owed to gather assets which allow the corporation to earn a larger quantity of return.

TYPES

Trading on Thin Equity: If the equity capital is less than the debt capital of a company.

Trading on Thick Equity: If the equity capital is more than the debt capital of a company.

ADVANTAGES

1. Payment of Dividend on higher rates
2. With dividends, an individual Minimize his Tax Burden
3. It results in an increase in Goodwill of the Company
4. There is a Control on financial Sources hence the business also does not suffer

DISADVANTAGES

1. The income is uncertain
2. There might be a low rate of return
3. Loan on the high rate of interest.
4. There is fear of Over Capitalization.
5. Under intervention of Loan providers.

DIFFERENT BETWEEN TRADING ON EQUITY AND EQUITY TRADING:-

Trading on equity is a simple approach in which the percentage of debt contents is increased in capital structure, however equity trading is buying and selling of shares in the stock market.

Investors are fascinated to buy shares whose rate of Interest is greater than fixed interest charges due to the fact investors can earn extra quantity of income in the form of dividends and it will additionally expand the price of shares.

TRADING ON EQUITY  AND FINANCIAL LEVERAGE:-

Leverage means power. If an organization buys assets and its buy price is paid through getting a loan, then this system of trading on equity is known as financial leverage.  Business enterprises do so because they are aware that the return on investment (ROI) is greater than fixed interest charges.

The company's tries to increase its financial power by purchasing all assets with the help of long term debt in order to earn a greater amount of profits with this system.

It is a well-known fact that option holders are always in all likelihood to cash in their options when there is a rise in earnings.

For this particular reason, buying and selling on equity leads to extra earnings, there are extra possibilities that options will earn a greater return for the holder. Since trading on equity may also lead to uneven earnings, it will increase the already known price of stock options.

The managers (not owners) are more likely to use such an option. Using the concept, managers have the danger of raising the price of stock options. On the other hand, family-run commercial enterprises will exhibit greater interest in financial stability, so they would keep away from this financing technique.

In the Primary or the New Issue Market, new issues of securities are raised, which are issued to the public for the first time. It is used by new and present companies. The company issues new shares and debentures for gathering lengthy-time period funds. The issue of securities is made thru the prospectus.

The purchaser of new shares and debentures can also be businessmen, clients of the company, personnel of the company, current shareholders, etc.

BENEFITS

• Less Price manipulation while in comparison to the secondary market.
• There is no brokerage payment, transaction fees, etc
• Market fluctuations do not affect it
• It helps in the diversification of the portfolio
• It helps in raising capital for the companies
• Investors get the share at the same prices
• It helps in cost Reduction

KEY PLAYERS

• Corporations - They require funds to grow and run their operations
• Institutions referred to as “Buy Side” Fund Managers
• Investment Banks are referred to as the “Sell Side”
• Public Accounting Firms

FUNCTIONING OF PRIMARY MARKETS

It enables capital formation through channelizing money from personal savers into perfect productive investments. It consists of a company, an investor, and an underwriter.

The company issues IPO: The securities for the first time are issued in the primary market. This system is acknowledged as an Initial Public Offering IPO. Since the securities are bought for the first time, the primary market is recognized as the New Issue Market.

Role of the underwriter: It is a whole method of raising capital by way of promoting new stock to investors through an IPO. The underwriter then decides the sale price of the new issue of securities. The underwriter enables and monitors the new issue offering. Financial establishments such as funding banks, insurance plan companies, and so on provide underwriting services.

Investors: They are the purchasers of the new securities in the primary market

PREREQUISITES FOR INVESTORS:

• PAN Number
• Bank Account
• Demat Account

TYPES OF ISSUES

Public Offering: A public offering happens when a listed company makes an offer document. The document may be of the fresh issue of securities or an offer for sale to the public.

Rights Issue: The right Issue is when a listed company issue fresh securities to the existing shareholder. It is best suitable for companies that would like to raise capital to fund their operations or looking for better growth opportunities.

Private Placement / Preferential Issue: Private placement is basically an issue of shares or convertible securities by listed companies which is neither a right issue nor a public issue. It is an effective way for the company to raise equity capital.

ROLE AND FEATURES OF PRIMARY MARKET:

• Organization
• Underwriting
• Distribution

1) The Organization of New Issues:

There are two types of investigation that are carried out:

The preliminary investigation includes designated learning about economical, financial, legal, and technical factors to make certain the soundness of the project.

The structure of financial arrangements involves requirements and availability of promoter’s equity, equity from the public, different ratios, and overseas exchange requirements.

The service provider bankers can be banks, financial institutions, private funding firms, etc.

An essential component of the company of new shares is the information about adequacy and structure of financial arrangements.

The second feature is carried out via sponsoring institutions. They supply advisory services. The advisory carrier includes Types of issue, Thug, Pricing, Methods of issue, etc.

2) Underwriting of New Issues:

The underwriting means guaranteed buy of a targeted quantity of new issues at a fixed price. The buy may additionally be for sale to the public, for solely one’s portfolio or for each purpose. Minimum subscription is assured by using underwriters. If the issue is absolutely subscribed, no legal responsibility would be left for the underwriters.

If the underwriter fails to promote the assured quantity of shares to the public, it will have to buy the unsold shares via itself. They can be banks or economic establishments or specialized underwriting firms.

3) Distribution of New Issue:

Distribution of new issues means the sale of the stock to the public. The distribution job is finally hand over to brokers and dealers. The stock broker or dealers hold direct contact with the supreme investors.

DISADVANTAGES

• During over subscription, small investors don't get an allocation.
• Money gets locked in for a long time.
• Quite expensive
• Disclosure of information
• Decision’s take time