October series future expiry goes down to the wire
The week gone by saw the markets gaining further ground and getting set for a decisive move in the week ahead. This week would also see the October series futures expire and currently the bulls have a strong upper hand.
Apple store employees greet customers at the opening of a new store in Dalian, China’s Liaoning province. US technology giant Apple will keep investing in China despite slowing growth. China’s sixth cut in interest rates, was the trigger for market gains. AFP photo
There are just four trading days to go and we have a current gain of 426.95 points or 5.43 per cent on the value of Nifty of 8295.45 against September expiry of 7,868.50 points. Sensex gained 256.21 points or 0.94 per cent to close at 27,470.81 points. Nifty gained 57.30 points or 0.70 per cent to close at 8,295.45 points.
Broader indices saw BSE100, BSE200 and BSE500 gain an identical 0.58 per cent. What is to be interpreted from this beats me but it is indeed a strange coincidence. BSEMIDCAP gained 1.08 per cent while BSESMALLCAP again gained coincidental figure of 0.58 per cent.
Sectoral gainers were led by BSE TECK up 2.69 per cent followed closely by BSE IT 2.55 per cent and then BSE FMCG 0.62 per cent. Losers were led by BSE CAPGOODS down 1.98 per cent followed by an identical 1.20 per cent by BSE BANKEX and BSE METAL.
In individual stocks, gainers were led by Infosys up 5.03 per cent followed by Reliance 4.82 per cent, NTPC 4.58 per cent and Axis Bank 4.13 per cent. Losers were led by L&T down 5.92 per cent, Vedanta 5.85 per cent and Hindalco 2.80 per cent. In other stocks, Idea Cellular lost 6.62 per cent.
Global markets were also up led by Dow which closed at 17,646.70 points up 430.73 points or 2.50 per cent. China announced a sixth cut in interest rates by 25 basis points to 4.35 per cent. I believe this was the trigger on Friday for gains.
One needs to see what the impact on global markets is when they resume trading on Monday. FIIs were buyers of Rs 1,735 crore worth of equity while domestic institutions were sellers of Rs 347 crore. The rupee lost marginally closing at Rs 64.82, a loss of 2 paisa or 0.03 per cent.
The driver this week will be expiry of futures of October series where bulls have a very comfortable position. Nifty close on Friday was higher than September expiry figure of 7,868.50 points by 426.95 points 5.43 per cent.
Bulls should be able to press home the advantage from here onwards simply because they have the momentum on their side. Three of the five phases of polls in Bihar are over, and with results due on November 8, markets and bulls will be wanting a NDA win to push markets higher and onwards to a new lifetime high.
Now, we see two mega issues in primary market. First from Interglobe Aviation which owns Indigo. A highly successful airline in the low cost space the company has a price band of R700-765. The airline makes good sense to fly with, but investing in it may not be the best choice.
Promoters of the company chose not to address media, brokers and analysts at the roadshow, and in a damage control exercise, visited Mumbai to meet the media. Secondly, this is the first company which has announced hefty dividends to promoters before going public.
They have reduced net worth of the company to negative as on June 30, 2015 after paying interim dividend. The fact that they have issued a liberal bonus issue of nine shares for one just before filing the document is a done thing.
However, bringing net-worth of the company to negative for payment of dividend to promoters leaves a bad taste in the mouth. They have left the tip to be paid by new shareholders as dividend distribution tax would be paid in July-September quarter. The issue is expected to be subscribed by QIBs and FIIs who understand retail and HNIs.
The other issue is from ‘F&F’ player or flavours and fragrances player S H Kelkar and Company. This 90 year old company is from Mumbai and has its roots in Girgaum and Dadar before setting itself up at Mulund.
The company plans to raise roughly Rs 500 crore in a simultaneous offer of a fresh issue of Rs 210 crore to repay debt and become a debt free company and an offer for sale in a price band of R173-180. It is the leading Indian company in the segment and competes with multinationals who have Indian outfits and vice versa.
The company deals with almost the who’s who in the FMCG space be it hair oils, soaps, detergents, deodorants, milk products, ice-creams and so on. An interesting proposition worth having a look at.
The week ahead would be choppy and the two key drivers would be global markets and in India the expiry coming up on Thursday. With bulls currently having an upper hand, the bias in the markets would be on the positive side. 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 http://ak57.in
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