Sharp gains, flat days and correction, it was all happening at Dalal Street
Finance Minister Arun Jaitley (left) speaks to World Bank Managing Director and Chief Financial Officer Brazil’s Joaquim Levy (centre) in New Delhi. Pic/AFP
The week gone by had all the action one could imagine. It began with sharp gains on Monday and was sideways to flat for the next three days. Friday was the day of correction. There was more correction after we closed in the global markets. At the end of the week, even though markets closed positive, the sentiment was certainly not the same. BSE SENSEX gained 265.14 points or 0.93 per cent to close at 28,797.25 points. NIFTY gained 57.05 points or 0.65 per cent to close at 8,866.70 points. Broader markets saw BSE100, BSE200 and BSE500 gain 0.93 per cent, 0.95 per cent and 1.03 per cent respectively. BSEMIDCAP gained 0.86 per cent while BSESMALLCAP gained 1.72 per cent. In sectoral gainers, BSEREALTY was up 5.67 per cent followed by BSEAUTO 2.40 per cent and BSEPSU 2.31 per cent. On the losing side were BSEIT down 1.885 and BSETECH 1.44 per cent. In individual stocks BHEL gained 12.74 per cent followed by some of the PSU banks. PNB gained 14.86 per cent while Canbank gained 10.57 per cent. Yes Bank was down 7.95 per cent followed by TCS 6.41 per cent and HDFC 1.88 per cent, all on the losing side.
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Into a tailspin
What is interesting is the way Yes Bank reacted about the impending QIP offer. Once the price and date was announced, the share went into a tailspin and was hammered down. The scrip lost Rs 110.25 on a weekly basis but on an intra week basis from the high of Rs 1,450, lost as much as Rs 172.75 or 12.45 per cent. The QIP issue has been currently deferred. The Indian rupee gained 14 paisa or 0.21 per cent to close at Rs 66.68. Dow Jones saw a sharp fall on Friday, after it became clear that the low interest rates regime is over and interest rates would have to rise hereafter. The Dow Jones lost a massive 406.21 points or 2.20 per cent, to close at 18,085.45 points. What is important is that all the losses suffered were on Friday, as on a weekly basis, after four trading days markets were virtually flat.
The two issues
The market sees two primary issues during the week which has a trading holiday on Tuesday. The first issue which opens on today, and closes on September 15, is from L&T Technology Services Limited, in a price band of 850-860. The offer for sale is for 1.04 crore shares and would garner between Rs 884 crore to 894 crore. The anchor allocation at Rs 860 for 31.20 lakh shares has been made to 19 investors, comprising 33 entities. The shares are being offered on a fully diluted and consolidated basis based on March 2016 earnings at 26.5 to 26.8 times. The company is a pure play technology company in the ‘ERD’ space and can be compared on a standalone basis with Cyient or Tata Elexsi.
Eye on reactions
The issue would get subscribed considering the strong parentage and the large number of bankers. The poor performance of the previous issue from the same group may affect subscription. There seem to be little or no listing gains and subscription should be only for the medium to long term, at least 12 months.The second issue is from GNA Axles Limited, a company from Hoshiarpur Punjab. The company is raising Rs 129-131 crore, in a price band of Rs 205-207 from a fresh issue of 63 lakh shares. The issue opens on September 14 and closes September 16. The company manufactures axles used in highway and off-highway vehicles and is into exports as well. About 55 per cent of the Rs 500 crore plus top line is from exports while the balance is domestic sales. The issue is being offered on a consolidated and fully diluted basis at a PE multiple of 11.99 to 12.11 times. The valuations look decent and need to be looked at. There is one technical issue where for the first 10 days on listing, the share would trade on a trade to trade basis as the size of the issue is less than Rs 250 crore. This could provide investors an opportunity to enter the share, if they have not received allotment.
Caution is advised
Markets are currently confused about the direction want to go. The all-time high is less than four per cent on the BSESENSEX and three per cent on the NIFTY, which can be done in two to three days. The same would happen well before Diwali and corporate results for the quarter ended September 2016 begin. Corporate results are a good 30 days away and Diwali, about 50 days. Do not buy in anticipation as markets have something different in mind. We will see a weak start to a four day trading week, which sees two IPOs. Trade cautiously. At higher levels, a slip and fall can bring you down sharply.
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 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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