Eye on the world

The markets played out as expected and expiry day turned out to be a fairly quiet day. The BSESENSEX lost 239.59 points or 1.38 per cent. The NSENIFTY lost 100.25 points or 1.89 per cent to close at 5,190.60 points. The broader indices all lost much more than the benchmark indices showing widespread weakness during the previous week. The BSE100, BSE200 and BSE500 lost 2.11 per cent, 2.22 per cent and 2.29 per cent, while the BSEMIDCAP lost 2.76 per cent. The BSESMALLCAP lost even more at 2.94 per cent. Amongst sectoral indices BSEREALTY lost 6.09 per cent, BSECAPGOODS lost 4.87 per cent and BSEPSU lost 4.10 per cent. BSEIT gained 1.96 per cent. 

In individual stocks a big gainer was TCS with gains of Rs 116.05 or 10.65 per cent. The losers clearly overshadowed the gainers and topping the list of losers was JSW Steel down 9.45 per cent, Power Finance (PFC) down 9.33 per cent, BHEL 7.34 per cent, REC down 7.29 per cent, Axis Bank 6.45 per cent, SBI down 5.93 per cent and Larsen & Toubro down 5.5 per cent. There was a special short session of 90 minutes of trading held on April 28, Saturday, which saw the markets gaining. The BSESENSEX gained 53.09 points or 0.31 per cent to close at 17,187.34 points, while the NSENIFTY gained 18.40 points or 0.35 per cent to close at 5,209 points. The key takeaway from last week is that Foreign Institutional Investors (FIIs) were sold every day and their net sale was Rs 2,030 crore. They are negative for the month of April after four consecutive months of buying. Domestic institutions were sellers to the extent of a paltry Rs 203 crore. The Indian rupee depreciated further and closed at Rs 52.54.

The previous week saw a quiet expiry of April futures and they closed at 5,189 points, a gain of a mere 11 points over the previous month. Standard and Poor’s have downgraded the sovereign rating of India from stable to negative while Moody’s yet another rating agency from the United States has confirmed India’s rating as stable. One is not sure who is correct and who is wrong but it sure makes one wonder as to what drives these ratings? The IPO from TBZ opened and closed during the previous week. The price band was Rs 120-126 and was expensive in valuations. The net result of expensive valuations saw the issue getting barely subscribed at 1.15 times with the retail portion remaining undersubscribed at 2/3rd of its quota. It appears that promoters and merchant bankers are unwilling to learn the art of proper pricing. Time and again, they are bringing issues which are grossly overpriced. Therefore, not furthering the cause of reviving the primary market.

There is a large issue opening this week from Samvardhana Motherson Finance Limited which is raising Rs 1,665 crore from a combination of a fresh issue of Rs 1,344 crore and an offer for sale of Rs 321 crore by an entity of the promoters. Samvardhana is in the business of Automotives and broadly speaking, is a large auto ancillary. The proposed market cap of this issue would be in a range of Rs 7,016 crore to Rs 7,253 crore. Samvardhana owns 36.1 per cent of the listed entity as on December 31, 2011 and is the holding company of listed entity Motherson Sumi Systems Limited that has a market capitalisation of just under Rs 7,000 crore based on the closing price of Friday April 27. The company has recently acquired 80 per cent of Peguform group alongwith Motherson Sumi at a cost of Rs 1,006 crore. The business of the company going public is through a series of JVs and it has made a loss in the nine month period ended December 2011 due to one off items like forex loss and write offs for Peguform acquisition.

The profit of Samvardhana for the year ended March 11 was Rs 192 crore while the loss in nine months period ending December 11 is Rs 153 crore. It appears unlikely to be wiped out in the next three months and when this company would report results for the full year ended March 2012, they would be negative. Samvardhana is a company with a complex structure, multiple units located in multiple countries and deriving 75 per cent of its revenues from overseas. In a volatile global exchange era, earnings from such a company would be volatile. Though the company looks like a good bet, for the long term it makes sense to avoid the issue currently. The week ahead has a holiday on Tuesday on account of Labour Day and the markets would be driven by global cues and individual stocks depending on their results.

Markets are likely to be range bound. The BSESENSEX has support at 17,023 points, then at 16,954 points, then at 16,803 points and finally at 16,659 points. It has resistance at 17,243 points, then at 17,379 points, then at 17,463 points and finally at 17,664 points. The NSENIFTY has support at 5,155 points, then at 5,126 points, then at 5,087 points and finally at 5,021 points. It has resistance at 5,224 points, then at 5,282 points, then at 5,342 points and finally at 5,378 points.

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
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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