All eyes on the exit

Bull run means there are plenty of opportunities but do jump off the buying bandwagon, if the timing is not right

PM Narendra Modi (c) with Sri Lankan President M Sirisena (l) and PM R Wickremesinghe (r) in Norwood, east of Colombo. Modi desires a quantum jump in relations with Sri Lanka, as New Delhi jostles with Beijing for influence in the island nation. Pics/AFP
PM Narendra Modi (c) with Sri Lankan President M Sirisena (l) and PM R Wickremesinghe (r) in Norwood, east of Colombo. Modi desires a quantum jump in relations with Sri Lanka, as New Delhi jostles with Beijing for influence in the island nation. Pics/AFP

Markets were on a roll last week and a sharp Wednesday rally ensured decent gains for the benchmark indices. They continued to make new lifetime highs with the BSESENSEX gaining 329.35 points or 1.10per cent to close at 30,188.15 points. NIFTY gained 115.60 points or 1.24per cent to close at 9,400.90 points. The broader indices saw the BSE100, BSE200 and BSE500 close with gains of 1.32per cent, 1.28per cent and 1.29per cent respectively. BSEMIDCAP gained 0.92per cent and BSESMALLCAP gained 1.13per cent.

Tops and flops
The top sectoral gainer was BSEREALTY up 5.71per cent followed by BSEAUTO and BSETECH an identical 3.26per cent. BSEIT was up 2.80per cent. On the losing side, there was just one BSEPSU down 0.29per cent. In individual stocks the top gainer was Idea Cellular up 12.97per cent followed by DLF 11.98per cent. Others included Bharti Airtel 5.88per cent, Vedanta 5.84per cent a followed by Hero Moto 5.18per cent. The losers were led by Yes Bank down 7.76per cent followed by some of the PSU banks like Canara Bank 7.20per cent, Union Bank 6.55per cent and PNB 3.22per cent.

Dow Jones lost 110.33 or 0.53per cent to close at 20,896.61 points. The Indian Rupee gained 7 paisa or 0.11 to close at Rs 64.30. Currently, global cues do not indicate any trends and markets seem to be moving in a band without any direction.

Action in plenty
The primary market continued to see a lot of action. The issue from government company Hudco was very well received. The issue opened on Monday, May 8 and closed on Thursday May 11 and was oversubscribed 79.55 times. The issue was for 20.40 crore shares in a price band of Rs 56-60. The QIB portion was subscribed 55.45 times, HNI 330.36 times and retail 10.79 times. What is heartening is that the share received applications from 20.13 lakh investors and created a new record, beating the previous one of 19.75 lakh applications in D-Mart. What enthuses most from a capital market perspective is that these new investors are coming from Tier 2 and Tier 3 towns. New demat accounts of over three lakh investors have been opened in the last couple of months. Also the SIP flow into mutual funds is now Rs 4,200 crore monthly. A large portion of the incremental flows are again from these same towns.

Number of issues
Shares of S Chand and Company Limited listed on Tuesday May 9, and survived a big scare managing to close with minor gains of about one percent. The share issue was very heavily subscribed with HNI portion subscribed a massive 204.65 times. The overall issue was subscribed 59.49 times. At close of the week, the share closed at Rs 622.05, down Rs 47.95 or 7.15per cent.

One wonders what ails the education sector with issue after issue failing to rise upto expectations. The previous issue was from C L Educate which continues to trade below the issue price.

The week ahead sees the issue from PSP Projects Limited which opens on Wednesday, May 17 and closes on Friday, May 19. The company is raising between Rs 206.64 crore to Rs 211.68 crore in a price band of Rs 205-210. The company is into the business of construction and is a contractor, developing special projects in Gujarat, particularly Ahmedabad.

Yardstick for success
The other issue during the week is the invit from India Grid Trust which opens this Wednesday May 17 and closes on Friday, May 19. The trust is raising Rs 2,250 crore in a price band of Rs 98-100. The lot size is 10,206 units and in multiples thereafter of 5,103 units. The success of IRB invit is unlikely to be seen in this issue, because of one fundamental difference. Returns to investors in the issue of India Grid in the initial years would be entirely by way of interest income, while in the case of IRB, it was a combination of interest and dividend.

The interest component was initially to be higher and then reduce as time went by. The interest income would attract tax for individuals, and therefore reduce the net returns from the product. By Friday, we will know the overall response to the issue which is into transmission lines and offers the investor an asset with income earning capacity for over 30 years.

Slew of resignations
Shilpi Cable company on May 11, informed the exchange that the board would meet for issue of bonus shares on May 28. This notice was issued at 14.28 hours. At 15.20 hours it issued a notice that the Company secretary has resigned with effect from May 1. At 16.07 it issues a notice that the CFO has resigned with effect from May 1. At 16.14 it issued a notice that the independent director has resigned with effect from May 3. The timing of the bonus issue and the resignations raise question marks. One hopes the regulator looks into the same. The share price in recent times has fallen from Rs 225.60 on April 20 to Rs 67.45 on Friday, May 12.

Markets are in a bull run and they would not let things go out of control quite easily. Enjoy the same, as it lasts but be quick to exit when you sense trouble. Opportunities abound.

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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