All Fall Down

Markets dampen festive spirit amid global economic concerns

All Fall Down

Markets dampen festive spirit amid global economic concerns

The week gone by saw carnage in the global markets. India was no exception and our markets have now fallen to levels last seen in May 2010. The BSE Sensex fell 697.96 points or 4.14 per cent to close at 16,141.67 points. The NSE Nifty fell a little more losing 227.30 points or 4.48 per cent to close at 4,845.65 points. The intra-day lows made by the Sensex were 15,987.77 points and 4,796.30 by the Nifty.

Free fall: Dahi Handi celebrations at Dadar in 2010

The broader markets saw the BSE100, BSE200 and BSE500 lose 4.45 per cent, 4.65 per cent and 4.80 per cent respectively. The BSE Midcap lost 5.93 per cent and the badly mauled BSE Smallcap lost a staggering 8.09 per cent. In sectorial indices the BSE Bankex lost 7.51 per cent while the BSE Realty lost 7.36 per cent.

Loss
In individual stocks, ICICI Bank lost Rs 107 or 11.38 per cent to close at Rs 833. PFC lost Rs 23.85 or 14.05 per cent to close at Rs 145.85. On the positive side we saw the BSE FMCG losing a mere 0.25 per cent with the heavyweights ITC gaining 0.28 per cent and Hindustan Unilever losing a mere 0.19 per cent. The Foreign Institutional Investors (FIIs) sold stock of about Rs 2000 crore in the four trading sessions while domestic institutions bought about Rs 1100 crore.

Last week saw an IPO from Brook's Laboratories open and just about managed to get subscribed with an overall subscription of 1.6 times. This was yet another issue where there was not even a single bid in the Qualified Institutional Buyers (QIB) category indicating the quality of fundamentals of the issue.

Issues
The week ahead would see an IPO from SRS opening on Tuesday in a price band of Rs 58-65. The issue is for 3.5 crore shares. The dominant business of the company is jewellery and close to 70 per cent of the top line comes from it.

The other businesses include, Cash and Carry, retail outlets, food courts and cinema screens. The company focuses on tier 2 and tier 3 towns, which makes the overheads and other costs cheaper than those running similar operations in metros and tier 1 towns. The price earnings multiple based on fully diluted March 11 earnings is a staggering 21.56 times at the lower band and 24.16 times at the upper end of the price band. Jewellery companies like Thangamayil Jewellery and Shri Ganesh Jewellery are available at single digit valuations of 6.44 and 2.75 times respectively. Muthoot Finance also opens its bond issue to raise upto Rs 500 crore and oversubscription of Rs 500 crore making a total issue of Rs 1000 crore.

The duration of the bonds ranges from 2 years, 3 years and 5 years with coupon rates of 12 per cent and 12.25 per cent. The rating of the issue is AA- and is similar to the previous issues from Mannapuram and Shriram City Union.u00a0

Global
The markets have been tracking global cues and the concerns emanating from Europe and the US seem to be taking their toll on the market. This week would see the expiry of August futures on August 25 and this could cause some volatility on this account. The positive part of this month's futures is that the open interest is not large enough to be a matter of concern.

Expectations
This week there is likely to be some short-term pullback in the markets. This might very short term in nature and maybe good for a couple of days or till expiry. This upmove could be used to exit the market or nimble footed traders could try some quick trades and make some money. In the medium term, the concerns about Europe or the US have not yet been addressed and the markets are really worried. Quick trades on the long side could be looked at in the coming week but, strict stop losses should be observed. A smart rally but nothing beyond that should be expected. Trade cautiously.

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

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.

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