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Friday, May 6, 2011

Muthoot Finance Ltd.(MFL) Listing

Today, on the auspicious day of Akshay Trutiya, Muthoot Finance Ltd share was listed at the price of 196.6 rupees, went to the high of 198.9 and currently trading around 179.5.
But it gave sufficient time to secure listing gains around 190 levels.
Exit at 190 level means, profit of 2010 rupees (for the allotment of 134 shares), which comes out to be a return of 8.57% that too in just 15 days.
This when annualized (for 1 year) is equivalent to whopping 209% return, compare it with bank FD rates, even top rate is 9.5% per annum (for non senior citizens).
Still return is much less than, what I expected in my IPO research post of MFL, where I expected 15% non annualized returns as listing gains.

Why returns were less than expectation?
First reason is the poor market sentiment due to FII net selling for 9 days in succession.
Second reason pertains to the postponement of the listing which earlier was supposed to take place on May 3, 2011.
As the company is in the business of gold loans, promoters wanted the stock listing on Akshay Trutiya, which is supposed to be a favourable day for buying gold.
3 May was the day, RBI was going to announce the annual credit policy (by 11 AM) and it was firmly expected that policy rates' hike was in imminent.
As the policy rates hike were unfavourable for market, it would have been better had the stock listed before that.
Had the listing took place on 3 May, Listing gains would have been better.


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