Rough times a-rolling

Congress workers raise slogans against FM Arun Jaitley over his alleged collusion with liquor baron Vijay Mallya before his departure to London, in Bhopal. Pic/PTI

Markets continued their wild and volatile manner in the past week. The BSESENSEX lost 467 points on Monday and 509 points on Tuesday before recovering 304 points on Wednesday and 383 points on Friday. The week ended with BSESENSEX losing 299.18 points or 0.79 per cent to close at 38,090.64 points. NIFTY lost 73.90 points or 0.64 per cent to close at 11,515.20 points. The direction the market took on Monday was how it ended. The broader markets saw the BSE100, BSE200 and BSE500 lose 0.76 per cent, 0.79 per cent and 0.84 per cent respectively. BSEMIDCAP was down 0.95 per cent while BSESMALLCAP was down 1.36 per cent.

Tops and flops
The top sectoral gainer was BSEPOWER up 0.47 per cent followed by BSEMETAL 0.32 per cent and BSECAPGOOD 0.07 per cent. The top sectoral loser was BSEAUTO down 1.89 per cent followed by BSEBANKEX 1.27 per cent and BSEFMCG 0.98 per cent. In individual stocks the top gainer was NTPC up 3.17 per cent followed by Eicher Motors 2.43 per cent and Power Grid 2.17 per cent. The top loser was Bank of Baroda down 9.88 per cent followed by Hero Moto 4.39 per cent and Tata Motors 4.15 per cent. The Indian Rupee was under pressure and made an intra-week low of Rs 72.92 before recovering sharply to close at Rs 71.85, a loss of 12 paisa or 0.17 per cent. Dow Jones had a decent showing and gained 238.13 points or 0.91 per cent to close at 26,154.67 points.

Eye on issues
The week ahead sees the Govt. divest a part of its stake in Railway company, Ircon International Limited. The issue opens on Monday, September 17 and closes on Wednesday, September 19. The issue which is an offer for sale of 99.05 lakh shares is in a price band of Rs 470-475 and has a discount of Rs 10 for retail investors and eligible employees.

The company had registered revenues of Rs 4,212 crore for the year ended March 2018 and a net profit of Rs 412.59 crore. The EPS for the year ended March 2018 on consolidated basis was Rs 42.13. The Railway is the largest customer for Ircon which has a current order book of Rs 22,406 crore, which is roughly six times of current revenues. It enjoys a decent net margin of 9.79 per cent and a return on net worth of 10.98 per cent. The nature of business entails a high mobilisation advance from the Railways, which remains with Ircon during the period that the order is being executed. This ensures that Ircon does not need capital for executing projects for the Railways.

Secondly the interest earned on the advance from Railways is credited back to the Railways. Because of this, the return on capital employed appears on the lower side as over 80 per cent of the total order book is from the Railways. The company has also begun executing hybrid annuity projects where it builds the railway tracks, operates and maintains them for the life of the project. These projects are in subsidiaries and are SPV's with different states.

The company looks exciting and interesting and looking at the massive railway expansion of network and refurbishing of the same, offers scope for continuity in business with decent returns. It makes sense to invest in the issue from the Govt.

Choppy going
The week ahead would be volatile. Markets are likely to register gains and move ahead and try to break previous week's highs. In the previous week, the low was broken, and markets recovered very sharply from there. This week the high may be broken.

That the Govt. is worried and has announced that non-essential imports would be restricted, points to the fact that the worst for the rupee is over in the short term. Second macro data during the week was positive with inflation and food inflation being under check. Use rallies to sell and sharp corrections to be bought into. Euphoria is needed for markets to peak out and we are in the process of getting there.

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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