Steer clear of short-lived euphoria as it is patience that will help you reap rewards
The markets continued to be on a roll but are certainly facing pressure on every rise. The all-important GST is set to enter the final stage, and may actually see the light of day on Tuesday or Wednesday. What next, is the question. The only answer to that is, short lived euphoria. Euphoria typically lasts between 48-72 hours and the timing of the correction would be anybody’s guess, depending on when the GST bill is passed. Investors should use this event to liquidate positions and then wait for the correction to re-enter at lower rates.
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Vehicles make it through flooded roads in Jodhpur in Rajasthan. Pic/PTI
The BSESENSEX gained 284.62 points or 0.89 per cent to close at 28,051.86 points while NIFTY was up 97.30 points or 1.14 per cent at 8,638.50 points. The broader indices saw BSE100, BSE200 and BSE500 gaining 1.38 per cent, 1.41 per cent and 1.45 per cent respectively. BSEMIDCAP gained 3.13 per cent and BSESMALLCAP was up 1.67 per cent. In sectors the top gainer was BSE CONDUR up 2.52 percent, followed by BSEAUTO 2.15 percent and BSEPOWER 1.98 percent. In losers, the top loser was BSECAPGOOD down 0.46 percent followed by BSEMETAL 0.30 percent. The top loser was Dr Reddy down a massive 18.53 percent, followed by GAIL 3.25 percent and SAIL 1.88 percent.
It figures
The Indian Rupee gained 6 paisa or 0.09 per cent to end at Rs 67.02. The Dow Jones lost 138.61 points or 0.75 per cent to close at 18,432.24 points. July futures ended on a extremely buoyant note, with the series gaining 378.55 points or 4.57 per cent at 8,666.30 points. The open interest at the beginning of the August series is higher by about 18 per cent, which is reflecting the buoyancy in markets. The primary market continues to see traction and there are two issues opening next week.
The first issue is from Dilip Buildcon Limited which opens today and closes on Wednesday. It would be raising Rs 654 crore, in a price band of Rs 214-219. The issue comprises a fresh component of Rs 430 crore and an offer for sale of 102.27 lakh shares. The price earnings multiple of the offer based on fully diluted and consolidated basis for March 2016 is between 12.75 and 13.04 times. Dilip Buildcon is currently executing and bidding for projects mainly from the government where payments are also streamlined.
The second issue is from S P Apparels, looking to raise Rs 215 crore, from a fresh issue and Rs 24.12 crore, from the offer for sale of 9 lakh shares in a price band of Rs 258-268. The company is in the business of manufacturing children’s garments for export and has marquee clients like Tesco and Primark. S P Apparels also has a subsidiary which has sublicensed the manufacture and retail of men’s garments under the brand ‘Crocodile’. This business is yet to realise the true potential and one would see benefits flowing in a couple of quarters post the IPO. The shares are being offered in a price earnings multiple of 15.04-15.63 times on a fully diluted and consolidated basis for year ended March 2016. The company has come through tough times and this could virtually be a second innings for them. The quality, systems and compliances followed has ensured that clients have remained with the company even during tough times. Children’s wear is a tough segment, and, this is the second largest player in the country for exports in this segment. People should look to invest if they have patience for a minimum of 2-3 quarters.
The shares of Advanced Enzyme Technologies list today. This company had issued shares in a price band of Rs 880-896 and had received oversubscription of 394 times in the HNI segment, whose cost of funding at a reduced rate of interest of 5 per cent is about Rs 340. God forbid if the share trades below R 1225 on listing day, there could be some selling pressure on account of losses being suffered by this category.
Weather view
Rains have been copious and the weather forecast of better than average rains, seems to be coming out true. The unfortunate part is the infrastructure, which is showing signs of giving way. Last year, it was Chennai and this year, it is Bengaluru and Gurgaon. No comments on the blame game but we all need to tighten our belts and get ready for the vagaries of nature, as the changing weather intensifies.
The week ahead would have all eyes on the Rajya Sabha and the inevitable GST bill. Euphoria will follow the passage of the bill but it needs to be used to book profits, not get carried away. Of course, the bulls have ammunition up their sleeve where post this bill, they will talk about the RBI policy meet to be held on Tuesday August 9. First things first, wait for GST and enjoy the short lived rally thereafter. Trade cautiously and do not get carried away.
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 and under no circumstances should be used for actual trading or making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
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