Exercise a good deal of patience amidst non-supportive global cues

Chinese employees work on socks for export at a factory in Huaibei in China's Anhui province. Beijing accused Donald Trump of 'blackmail' and charges are pushing the world's two biggest economies closer to a trade war. Pic/AFP

In the week gone by volatility continued to dominate the market place. After five trading days, the BSESENSEX ended with marginal gains of 67.46 points or 0.19 per cent to close at 35,689.60 points. NIFTY was up 4.15 points or 10,821.85 points. The strong rally on Friday managed to see the indices home otherwise we were trailing in the red. The broader indices saw the BSE100, BSE200 and BSE500 lose 0.07 per cent, 0.24 per cent and 0.48 per cent respectively. BSEMIDCAP was down 1.02 per cent and BSESMALLCAP lost 2.55 per cent. In short but for the benchmark indices which eked out small gains, the rest were in the red.

Trade wars
The only sectoral gainer was BSEBANKEX up 1.13 per cent. The top sectoral loser was BSEMETAL down 3.27 per cent followed by BSECAPGOOD 2.73 per cent and BSEIT 2.40 per cent. In individual stocks the top gainer was ICICI Bank up 6.17 per cent followed by HDFC 3.68 per cent and Bharat Petro 3.34 per cent. The top loser was Bank of Baroda down 8.05 per cent, followed by Hindalco 6.79 per cent and Vedanta 4.42 per cent.

Dow Jones lost 509.59 points or 2.07 per cent to close at 24,580.89 points. The Indian Rupee gained 17 paisa or 0.25 per cent to close at Rs 67.84. Trade wars have begun, and India has put import duties on some of the items which include walnuts, apples amongst others. The famous Harley Davidson bike has been spared. The US trade team is expected to arrive for negotiations shortly. It has now become a game of who blinks first, US or China. Even the European Union has announced its set of duties. It's a war between US and the rest of the world.

The valuations
The two issues which were open for subscription last week had a good showing but clearly the one from the PSU stable ran away with the honours. The issue from RITES which was an offer for sale of 2.52 crore shares in a price band of Rs 180-185 was oversubscribed 67.24 times. QIB portion received bids for 71.72 times, HNI portion 194.56 times and Retail portion 15.74 times. There were 13.76 lakh applications. There was a discount of Rs 6 for retail investors and eligible employees.

The second issue was from Fine Organics Limited which also was an offer for sale and consisted of 76.65 lakh shares in a price band of Rs 780-783. The issue was subscribed 8.99 times with QIB portion 12.85 times, HNI portion 21.01 times and retail portion subscribed 1.62 times. There were 2.04 lakh applications. The PSU offering did not have an anchor book while the issue from Fine Organics did.

The difference in subscription levels of the two issues indicates the valuations of the two companies. In the former, seeing the performance of some of the recently listed PSU companies like Bharat Dynamics, HAL, GIC and New India, 'DIPAM' took a call to offer an attractive price to investors. The immediate response was there for all to be seen. In the case of the latter, the issue was more than richly valued, and the response was therefore not overwhelming. The business that the company is in is great and the company excellent, but valuations demanded more than fair.

Watch out
The week ahead sees June futures expire on Thursday, June 28. The current value of NIFTY at 10,821.85 points is higher by a mere 85.70 points or 0.79 per cent which is neither here nor there. Bulls were struggling last week and with FPIs continuing to be sellers there could be real pressure in the markets into expiry. Global cues too are not very supportive and with trade wars likely to escalate, one is sure that things are set to get worse. Use any sharp dips to buy select stocks or just allow the series to expire.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only.

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