Where do we go now?

Union Finance Minister Arun Jaitley with Chairman of the General Council of Liberal Democratic Party of Japan, Hiroyuki Hosoda and members of the Japan-India Parliamentarians Friendship League in New Delhi. Pics/PTI

The markets continue to be a mixed bag, and, are unsure which way they want to move. Volatility is increasing and intraday and intraweek movements have increased significantly. The week gone by saw markets under pressure, but for the decision by Fed to keep interest rates unchanged, this time helped markets gain. Post the Fed decision, on Thursday our markets saw BSESENSEX gain 266 points and NIFTY 90 points. Had this not happened, markets would have ended in negative territory for the week.

The BSESENSEX gained a tad at 69.19 points or 0.24 per cent to end the week at 28,668.22 points. NIFTY gained 51.70 points or 0.59 per cent to close at 8,831.55. Markets are yet to breakout from the gap down opening of September 12 and are currently struggling in that zone. The broader markets saw the BSE100, BSE200 and BSE500 gain 0.67 per cent, 0.85 per cent and 0.90 per cent respectively. The BSEMIDCAP gained 2.16 per cent and BSESMALLCAP was up 1.52 per cent. There continues to be lot of action in this space, and this is where potential trouble for investors could emerge.

Bulls are cool
The top sectoral gainer was BSEMETAL up 3.46 per cent followed by BSEOIL&GAS 3.08 per cent and BSEREALTY 1.92 per cent. The losers were led by BSEFMCG down 1.45 per cent and followed by BSEIT 0.26 per cent. In individual stocks, the top gainer was Hindalco up 7.73 per cent followed by Yes Bank 5.48 per cent and Vedanta 4.74 per cent. The OMCs too had a good week with HPCL up 4.75 per cent, BPCL 4.43 per cent and IOC 2.44 per cent. The losers were led by Axis Bank down 7.29 per cent followed by Lupin 3.19 per cent and ITC 2.52 per cent.

The Dow Jones gained 137.65 points or 0.76 per cent to close at 18,261.45 points. The Indian Rupee gained 33 paisa or 0.49 per cent to close the week at 66.65. The week ahead, sees September futures expire on Thursday, September 29. Bulls have an upper hand, with current value of NIFTY being higher than the expiry level by 239.35 points or 2.79 per cent. While bulls have the advantage, we have seen on a number of occasions that the NIFTY is capable of swinging 100 points per day.

Eye on issues
The primary market continues to see a lot of traction. The mega issue from ICICI Prudential Insurance Company limited which had an offer for sale of 18.13 crore shares in a price band of Rs 300-334, was oversubscribed 10.48 times. QIB portion was subscribed 11.83 times. HNI 28.55 times, retail 1.42 times and shareholder reservation category, 12.20 times. The shareholder category saw HNIs leveraging and applying in this category. The funding cost here will be less than half that in the HNI category, as that was oversubscribed 28.55 times against 12.20 times.

The listing of L&T Technology Services Limited survived by the skin of its teeth, after being labelled a disaster. The issue which was priced at Rs 860 opened at Rs 900 on the BSE and at Rs 920 on the NSE. The low of the share on the BSE was Rs 860 and it was Rs 860.10 on the NSE. The share in weighted average close of the last half hour rose to Rs 865.10 on the BSE and Rs 869 on the NSE. There was just one institutional buyer for the share whose name was reported in bulk trade, and probably because of this, 11 lakh shares which were bought, the share survived day one. Whether it would survive Monday or the coming week looks most unlikely. The brand L&T is under threat and investors seem to be simply shying away from it.

Cues and views
There is another issue which has opened and is closing for subscription today. The issue is from HPL Electric & Power Limited. The company is making a fresh issue for Rs 361 crore, in a price band of Rs 175-202. The company is into four verticals namely metering, Switchgear, Lighting Equipment and Wires and Cables. The objects of the issue are to repay existing debt and for working capital purposes. The company has a stretched working capital cycle of roughly 144 days and proceeds of the issue would be deployed for the same, thus giving relief. The debt would reduce the interest cost and help improve the bottom line. The debt was taken to increase the capacity and they have no capacity constraint going forward, as plenty of the same is available.

The issue has been subscribed 29 per cent with Monday being the last day. QIB portion 36 per cent, HNI 1 per cent and retail 37 per cent. The system has always been that the subscription from HNIs and QIBs come on the last day and then retail chips in. The company is in a niche segment and has different competitors in different segments. While the opportunity going forward is huge, the key is managing working capital cycle. There are mixed views about this issue, about whether the issue would perform well and reward shareholders/investors.

The markets will remain choppy in the coming week and the final attempt to make a new all-time high, may be made this week. In case it fails, then time will be running out and things would become that much more difficult. Trade cautiously and continue to take money off the table.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in

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