Ganesh Chaturthi

The winning streak continues

20 December,2010 07:11 AM IST |   |  ARUN KEJRIWAL

With many IPOs completing their year end, it was a smooth and steady ride for the markets

With many IPOs completing their year end, it was a smooth and steady ride for the markets

The markets were up on three of the four days last week. Volatility was the order of the day and markets were subject to huge movements on both sides which seemed unconnected to world events. The BSE Sensex closed at 19,864.85 points having gained 355.96 points or 1.82%.
The NSE Nifty closed at 5,948.75 points gaining 91.4 points or 1.56%. The BSE midcap gained 162.04 points or 2.18% to close at 7,577.03 points while the BSE smallcap gained 232.7 points or 2.59% to close at 9,184 points. Clearly the markets had breath this time which is positive for them.

FIIs continued their selling on the exchanges and for the four days they sold on a net basis 658 crores. On the other hand the domestic institutional investors in the same period bought shares worth Rs 680 crs.

Shares of MOIL listed on the exchange and traded at a high of Rs 591 against the issue price of Rs 375. Selling pressure brought the share price down to close on Thursday at Rs 462, a gain of Rs 87 or 23.2%.

The weighted average on the listing day was Rs 514 which meant a gain of Rs 140 or 37.33%. As all successful retail applicants were allotted 17 shares, it meant a profit of Rs 2380 per applicant.
If one were to add the discount of 5% or Rs 18.75 per share it meant a total return of Rs 2700. The returns were much poorer than expected because of the over subscription.

SCI FPO shares also listed on Wednesday and against an issue price of Rs 140 closed at a discount at Rs 133.65. Retail investors were allotted shares at a discount of 5% and the share is effectively trading at a slightly higher price to the discounted issue price to retail investors.

The week gone by also saw the successful completion and subscription of the IPO of Punjab & Sind Bank.

The issue was subscribed an overall 50.75 times, with QIB portion subscribed 49.8 times, HNIs 85.84 times and retail portion 44.45 times.
The retail over subscription ensures that all allotment will be by lottery and every successful applicant will get the minimum of 50 shares only. In the case of HNIs the cost of leverage application would make the interest cost Rs 33 per share. This is likely to cause a selling pressure on listing of the share.

Claris Lifesciences lists today and the issue had created history by being the first IPO since the introduction of anchor investors who had to reduce the price band for non-subscription. It also created history when the price reduction was the maximum permissible 20%. The issue managed to get subscribed in its second attempt.

IPOs for the calendar year have come to an end and would start in all earnest in the middle of January 2011. The divestment programme of the government would kick off in a strong manner with many issues planned. They would compete with a large number of issues from the private sector.

Hero Honda Motors announced the long awaited split in their over 25 year old JV. It however assured that all concerns raised by various investors and investor groups have been taken care of and there would be no cause for concern by them.

Details of the same would emerge in due course of time but it is a relief that the same has been addressed by the management. (It may be of interest that the writer had raised concern on this issue a fortnight ago in the weekly column.)

Coming to the week ahead when trading resumes after an extended weekend, is likely to open with a positive bias. The BSE Sensex has support at 19,647, then at 19,491, then at 19,309 and then at 19,095 points. It has its final support at a level of 18,915 which is slightly below the low of 26 November of 18,954 points.
It has multiple resistances between 19,990 and 20,025 points, then at 20,333 points and finally at 20,643 points. The NSE Nifty has resistance at 5,985 points, then at 6,031 points, then at 6,083 points and finally at 6,172 points. It has support at 5,883, then at 5,845, then at 5,782 and finally at 5,685 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

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