Bourses for courses

Mar 09, 2015, 08:19 IST | Arun Kejriwal

Plenty of action, marked by volatile Wednesday was seen recently and investors should fasten their seat belts for the rocky road ahead

The week gone by saw the budget being discussed, analysed and dissected and finally pass the muster with the markets recording a weekly gain, but not before registering yet another lifetime high and crossing the important 30K level on the SENSEX and 9k mark on NIFTY.

Finance Minister Arun Jaitley and Chitra Ramakrishna, MD & CEO, National Stock Exchange visiting the NSE office, in Mumbai over the weekend. Pic/PTI
Finance Minister Arun Jaitley and Chitra Ramakrishna, MD & CEO, National Stock Exchange visiting the NSE office, in Mumbai over the weekend. Pic/PTI

There was a super volatile Wednesday when the new highs were made and markets then closed negative. At the end of last week the markets notched up gains with the BSE SENSEX gaining 87.45 points or 0.30 per cent to close at 29,448.95 points. NIFTY gained 35.90 points or 0.40 per cent to close at 8,937.75 points.

The broader indices performed better with BSE100, BSE200 and BSE500 gaining more at 0.64 per cent, 0.84 per cent and 0.99 per cent respectively. BSEMIDCAP gained 2.17 per cent while BSESMALLCAP gained 1.69 per cent.

In sectoral indices BSEHEALTHCARE was the best performer up 7.17 per cent followed by BSECAP GOODS up 2.88 per cent. The worst performing was BSEMETAL down 4.98 per cent followed by BSECONDUR 1.45 per cent, BSEAUTO 1.43 per cent and BSEPSU 1.40 per cent. In individual stocks, pharma companies were flying with Sun Pharma up 13.83 per cent followed by soon to be merged Ranbaxy 13.36 per cent.

Cipla gained 8.21 per cent. On the losing side was Coal India down 7.59 per cent largely on account of going ex-dividend as the amount was Rs 20.70 and the stock lost Rs 29.90 or in other words the net loss was Rs 9.20. Other losers included NMDC down 8.58 per cent and Cairn India 6.06 per cent.

Terrific and volatile Wednesday saw new lifetime highs being created and then the inevitable correction. The SENSEX gained intraday 431 points, then lost 739 points before closing in the red with a net loss of 213 points. Similarly NIFTY gained 123 points and lost 225 points intraday before closing with a net loss of 73.6 points.

Very clearly, the volatility was unprecedented but showed that weak hands were entering the market and they were stopped out the very same day. Spectrum auction has at the end of the fourth day seen commitments of Rs 86,000 crore against the minimum expected Rs 82,000 crore.

There is more to follow. After the coal auction and now spectrum, it is clearly demonstrated that scarce resources should be auctioned in a transparent manner and the nation must benefit rather the political system and a few people.

The IPO from Ortel Communications scraped through last week and opens up the question of what is fair pricing. The anchor book was made with just two anchor investors at the lowest price of the price band. The anchor book needs a minimum of two applicants.

Secondly, the company needed 75 per cent QIB application as it was a loss making company and just about scraped through getting that much and no more. Retail and HNI who had a 25 per cent chose to ignore the issue. The issue was technically subscribed but the size reduced with the offer for sale portion being reduced substantially.

The issue and the way it has been handled leaves a lot to be desired in terms of pricing and leaves egg on the face of the merchant bankers and the promoters. Moreover, with a spate of issues lined up the sentiment can sour right at the beginning.

There is another IPO from Adlabs Imagica opening on Tuesday, March 10. This company runs the theme park near Khopoli. The issue can best be compared with an issue recently from an established entertainment park Wonderla with parks in Bengaluru and Kochi. While the former is yet to break even, the latter is profit making.

The challenge for Adlabs Imagica is to get the footfalls and make people convinced about their theme park. This will take time and maybe the investor does not have the patience or the inclination to wait. Considering loss making, long gestation and plenty of choice with spate of IPOs coming investors could wait for better offerings.

The largest PSU bank SBI is expected to tap the capital markets with its follow on public offer or FPO in the week beginning March 16. It appears that they would offer a substantial discount to retail investors which is likely to be more than the customary 5 per cent.

Dow Jones closed at 17,856 points a weekly loss of 276 points or 1.52 per cent. The ECB will begin bond buying from Monday under its quantitative easing program. FIIs continued to be buyers for the week with purchases of Rs 4,200 crore and Rs 8,900 crore during February 2015.

Domestic institutions were buyers of Rs 795 crore during the week and Rs 4,750 crore during February. The rupee lost 34 paisa or 0.55 per cent to close at Rs 62.15. This week will see yet another new high. Investors may join in the party and also use high volatility to book profits and buy on dips, as was visible on volatile Wednesday last week. Enjoy the run on the bourses.

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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