Not out of the woods

Newly-appointed interim Infosys Chief Executive Officer (CEO) U B Pravin Rao (right) with co-chairman Ravi Venkatesan in Bengaluru. Pic/PTI

It was a four day trading week with Tuesday being a holiday because of Independence Day. The markets staged a recovery but they are certainly not out of the woods as yet. The markets need to consolidate and move on after forming a base at these levels. The BSESENSEX gained 311.09 points or 1.00 per cent to close at 31,524.68 points. NIFTY gained 126.60 points or 1.76 per cent to close at 9,837.40 points. The broader indices such as the BSE100, BSE200 and BSE500 gained 1.52 per cent, 1.76 per cent and 1.95 per cent respectively. The top sectoral gainer was BSEREALTY up 6.60 per cent followed by BSEMETAL 5.39 per cent and BSEFMCG 3.73 per cent. The top loser was BSEIT down 1.82 per cent followed by BSETECH 0.92 per cent.

Ups and downs
In individual stocks, the top gainer was DLF up 18.05 per cent followed by Vedanta 6.98 per cent and Tata Steel 4.91 per cent. The top loser was Infosys down 6.58 per cent followed by Dr Reddy 1.39 per cent and Larsen & Toubro 0.18 per cent. In international news the Dow Jones lost 183.81 points or 0.84 per cent to close at 21,674.51 points. The Indian Rupee lost one paisa or 0.02 per cent to close at R 64.14.

Infosys action drama
Action and drama was reserved for Infosys where it announced a meeting to consider a buyback of shares. This was followed by the CEO of the company announcing his resignation on Friday. The share gained on Thursday and lost on Friday. They announced on Saturday the buyback price of R 1,150, which is a good 23 per cent higher than the closing price of the share on Friday. The company would buy just under 5 per cent of the equity and spend R 13,000 crore for the buyback.

Murthy vs Sikka
The issue between NRN (Narayan Murthy) the founder of Infosys and his appointed Vishal Sikka has been at the cross roads and at loggerheads since the beginning. One thinks that NRN even after retiring from the company. was not able to let go and wants to continue to do backseat driving. The professional board which Infosys now has, is unable to cope with the pressure and demands and of course interference from the promoters particularly NRN. How much more damage to the company will be caused by founder NRN, who continues to interfere and demoralise the present management of Infosys?

Not over yet
The share gained from R 977 to R 1,021 post the buyback meeting and then lost to R 923 post resignation. Over the week, when the overall market has gained, Infosys lost R 65 or 6.58 per cent to close at R 923. With the buyback price announced at R 1,150 the share would gain in the short term, but the larger picture is more important that post this buyback, the company would have consumed R 13,000 crore of cash on the books. The key event to watch out for would be the movement in the derivatives segment in Infosys, and the traded volume in the same. Clearly, the drama known as Infosys is not yet over, you can bet on that.

Through the lens
There is an IPO which opens on Tuesday, August 22 and closes on Thursday, August 24 from Apex Frozen Foods Limited. The company is in the business of being an integrated producer and exporter of shelf stable quality aquaculture products. The issue price band is R 171-175. The PE ratio for the issue considering an EPS of R 10.17 is between 14.21 to 14.40 times. The company would through a fresh issue and an offer for sale raise R 152 crore. There would be interest in the issue and it appears to be reasonably priced. This is considering the opportunities available and the prospects of this business.

Overseas cues say
Markets would be looking for direction from overseas cues, particularly on the geopolitical front which is getting tense. Terror attacks have resulted in innocent people dying. Infosys is going to provide plenty of action in the days to come. Trade cautiously and allow markets to form a base in the coming days and weeks.

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.