There is a negative bias in the markets and investors are advised to be cautious
There is a negative bias in the markets and investors are advised to be cautious
The week gone by saw plenty of action with the first day being weak, the second day being marginally positive or flat, the third day being weak and the last two days being strong. The week ended with the BSE Sensex losing 59.99 points or 0.33 per cent to close at 18266.1 points. The NSE Nifty lost 10.25 points or 0.19 per cent to close at 5476.1 points. The BSE Midcap and BSE Smallcap lost more than the benchmark indices with losses of 0.39 per cent and 0.92 per cent respectively. The BSE100, BSE200 and BSE500 were almost flat with losses of 0.04 per cent, 0.03 per cent and 0.05 per cent respectively. 
Issues
Thursday, which was expiration day of the May series of futures saw the markets rising on short covering and the Friday factor came into play for the third consecutive time. It would indeed be interesting to observe this and see how often it happens.u00a0 There were two Initial Public Offerings (IPOs) and one Follow on Public Offer (FPO),which listed during the week. Sanghavi Forging had barely managed subscription and had issued shares at the upper end of the price band at Rs 85. The stock closed with huge gains of 42 per cent. The second issue was Aanjaneya Lifecare Limited, again just about subscribed. The issue price was Rs 234 and the share closed with gains of 33 per cent.
The third was the FPO from Power Finance Corporation Limited, which was issued at Rs 203 and the retail discount of 5 per cent, meant that retail got the issue at Rs 192.70. The share saw a great deal of selling pressure and closed below the issue price at Rs 199.45, a loss of 1.75 per cent.
Prices
There are two new IPOs this week. The first is the issue from Timbor Home Limited. The company is planning to issue 36.9 lack shares in a price band of Rs 54 and Rs 63. The issue would raise Rs 23.25 crore at the top end of the price band. The company is in the business of manufacturing and retailing modular kitchens through its owned and franchised stores. The company has a total of ninety outlets currently and plans to increase further. It also has an exclusive furniture store in Ahmedabad where all the furniture sold is manufactured in house. The concept of the company is not only interesting it looks like one,which will catch on, and do well going forward. Currently the size of operations with nine months sales ending December 2010 being Rs 55 crore and the profit before tax being Rs 3.06 crore makes the company really small.
Shares
The price earnings multiple at which the company is offering shares at the upper band is almost 34 times, which makes the pricing exorbitant and simply unaffordable. One has no choice of being forced to skip the issue even after liking the business and appreciating the future of the same. The issue opens today and closes on Thursday, June 2.
The second issue is from VMS Industries Limited, which is in the business of ship breaking and also operates one tug. The company is planning to raise Rs 25.75 crore in a price band of Rs 36.40. The company had revenues of Rs 102 crore in the nine months ended December 2010 with a net profit after tax of Rs 2.50 crore. The company is offering shares at price earnings multiple of 19.79 times based on the annualised numbers of nine months. These multiples are extremely expensive and looking at the small size of the issue the risk factor of the issue being "managed" and "manipulated" is also very high. I believe one should avoid the issue.
Vulnerable
Coming to the markets, they look vulnerable again this week. Last week we survived because of the expiry day short covering. There is none of that this week and probably as we come to the weekend, people would be talking of the impending diesel, LPG and kerosene price hike. The BSE Sensex has support at 18,136 points, 17,925 points, 17,745 points and finally at 17,425 points. It has resistance at 18,347 points, then at 18,447 points, then at 18,558 points and then at 18,724 points. The NSE Nifty has support at 5,431 points, then at 5,374 points, then at 5,359 points and then at 5,217 points. It has resistance at 5,503 points, then at 5,531 points, then at 5,575 points and finally at 5,688 points. There is a negative bias in the markets going ahead and investors are advised to be cautious.
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.inu00a0
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 isu00a0 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.
ADVERTISEMENT
Subscribe today by clicking the link and stay updated with the latest news!" Click here!
