Look before you leap

Markets continued to be under pressure and though they showed signs of recovery on Friday. Intra-day gains were surrendered as markets closed for the long weekend. BSESENSEX lost 638.72 points or 2.04 per cent to close at 31,283.72 points. NIFTY lost 175.80 points or 1.80 per cent to close at 9,788.60 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 1.78 per cent, 1.74 per cent and 1.64 per cent respectively. BSEMIDCAP lost 1.13 per cent and BSESMALLCAP was down 1.11 per cent. These indices saw a recovery on Friday which reduced the weekly losses.

Union Minister for Finance and Corporate Affairs Arun Jaitley looks at a book titled ‘GST' at a time when the economy is a cause for concern, at a function in Faridabad on Sunday. Pic/PTI

Flat out
The top sectoral gainer was BSECONDUR which remained flat losing 0.48 points. The top loser was BSECAPGOOD down 3.34per cent followed by BSEHEACAR 2.79 per cent and BSEMETAL 1.66 per cent. In individual stocks the top gainer was Coal India up 6.17 per cent followed by Hindalco 3.95 per cent and ONGC 3.63 per cent cent. The top loser was Asian Paints down 8.77 per cent followed by Adani Ports 6.66 per cent and Hind Unilever 5.53 per cent.

Bouncing back
The Indian Rupee recovered from the lows but ended in the negative down Rs 0.49 or 0.76 per cent to close at Rs 65.28 to the US Dollar. Dow Jones rose a bit and was up 55.50 points or 0.25 per cent to close at 22,405.69 points. September futures expired at 9,768.95 points, a series loss of 148.95 points or 1.52 per cent.

Primary focus
Primary markets continue to hog the limelight and the week ahead has two new issues opening for subscription and two issues listing on the bourses. The first new issue is from Godrej Agrovet Limited, which would be raising a fresh issue of Rs 291 crore, and an offer for sale of Rs 866 crore. The issue opens on Wednesday, October 4 and closes on Friday, October 6. The price band is Rs 450 to Rs 460.

Crore score
The second issue is from MAS Financial Services from Ahmedabad which is looking to raise Rs 460 crore, from a combination of fresh issue and an offer for sale. The fresh issue is Rs 233 crore and the offer for sale of a similar amount at Rs 227 crore, in a price band of Rs 456-459.

The new norm for price band has seen the difference narrowing significantly and it is virtually a fixed price. A band is just for the sake of calling it one. An issue of Rs 460 has a difference of a mere Rs 3 in the price band.

Issue cue
The first issue to list would be SBI Life Insurance Company Limited which had tapped the markets with its offer for sale of 12 crore shares in the price band of Rs 685-700.

While the institutional response was excellent, the opposite of the same was witnessed in the case of non-institutional categories. HNI and retail have both not liked the issue and the issue struggled in these categories. With this being the largest fundraiser so far in calendar year 2017, its listing would be a key to the markets going forward.

Snack track
The other issue to list would be from the snack maker Prataap Snacks. The company had issued shares in a price band of R 930-938 and was subscribed over 47 times. QIB portion was subscribed almost 77 times and HNI 101 times. This issue would list on Thursday, October 5.

Growth elusive
Result season will begin just around Diwali time and the performance of companies this time, will be watched very carefully as growth has been elusive for them. While the market has been factoring in growth for the last three years in the 15-17 per cent range, it has been significantly lower.

While valuations have been stretched to these expectations, results have been far lower and have thus increased valuations to a level where they have become extremely expensive. It appears that the markets would have to factor in the results and adjust to whatever is the true growth this time around.

Concern course
The week ahead would see RBI meet for its credit policy review on October 4, where it is widely believed that there would be no change in policy rates. The stance that RBI takes would of course be important as the slowdown in the economy and lower GDP numbers would be a cause for concern.

Corrections seen
The week ahead has a mere four trading sessions with today being a holiday. We have seen a correction over the last 10 days and though the markets have cooled off to some extent, they will probably become volatile and move in both directions henceforth till a clear trend from the quarterly results emerge.

It therefore makes eminent sense to stay on the sidelines and allow the results to unfold. Till then, participate in the primary market which is throwing up more than an IPO every week.

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.