Buy on bad days

Updated: Dec 05, 2016, 10:25 IST | Arun Kejriwal

Take advantage of the numerous opportunities sure to come up now

Arun Jaitley
Take advantage of the numerous opportunities sure to come up now

Markets gained on three of the five days but ended in negative territory after sustained weakness on Friday. The BSESENSEX lost 85.68 points or 0.33 per cent to close at 26.230.66 points while NIFTY lost 27.50 points or 0.34 per cent to close at 8,086.80 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.29 per cent, 0.23 per cent and 0.14 per cent respectively. BSEMIDCAP gained 0.13 per cent with BSESMALLCAP gaining 0.46 per cent.

In sectoral gaine, the top gainer was BSEAUTO up 1.14 per cent followed by BSEPOWER 0.63 per cent and BSECAPGOODS 0.36 per cent. The lose were led by BSEIT down 1.75 per cent followed by BSEBANKEX 1.47 per cent and BSEMETAL 1.38 per cent. In individual stocks the top gainer was Bharti Tele up 5.95 per cent followed by Tata Power 5.22 per cent, Hero Moto 4.76 per cent and ONGC 4.67 per cent. The lose were led by Hindalco down 6.33 per cent followed by NMDC 4.66 per cent, PNB 4.53 per cent and Bank of Baroda 4.08 per cent. OMC’s were on the losing side as well with HPCL down 5.81 per cent, BPCL 4.63 per cent and IOC 0.44 per cent.

The BSESENSEX made an intraweek gain of 453 points while NIFTY gained 136 points as of Thuday before all the gains and a little more were lost. This clearly shows the selling that set in which caused a weekly loss. The Dow Jones managed gains of 18.28 points or 0.10 per cent to close at 19,170.42 points. The Indian rupee gained 27 paisa or 0.39 per cent to close at 68.19 to the dollar.

Issues in focus
In the primary market, the IPO from Sheela Foam sailed through on the last day after garnering excellent support from QIB’s. The retail portion was undeubscribed while HNI portion was subscribed 3.35 times. The overall issue was subscribed 5.09 times which is creditable in the given market conditions.

There is an issue which opens this week from Laurus Labs Limited. The company, through a simultaneous issue which includes a fresh issue of Rs 300 crore and an offer for sale of 41.07 lakh shares in a price band of Rs 426-428 is looking to raise Rs 1,330 crore. This is the narrowest of price ranges ever. The EPS for the year ended March 2016 is Rs 20.86 while for the half year ended September 2016 is Rs 9.60. The PE ratio based on half tear annualised is 22.18-22.29 times while on annual March 2016 results is 20.42-20.51. The issue price is not cheap but not extremely expensive either. Looking at prospects of the pharmaceutical industry the share would be a good company to be invested in going forward. Looking however at the present market conditions it may offer better opportunity to buy post listing. The issue would be subscribed by QIBs as they like the sector.

A golden hue
The announcement about gold and gold equivalent (jewellery) is not new and is the same as the gold control order of 1974. It also allows holding of ancestral jewellery and explanation of source of income. Clearly, this announcement was made with an intention to set some fear in the minds of those people who had converted cash into gold and jewellery post November 8. Reade will recall that prices quoted in the media were as high as Rs 45,000 to Rs 48,000 for 10 grams against the official price of
Rs 29,000. It was a price which did not last and was based on sheer panic. Such situations do not last and they frankly, defy logic.

Markets are passing through trying and testing times. FIIs have been selle all through November and sold shares or equity worth Rs 18,250 crore on a net basis. Their total purchases in the 11 months of the calendar 2016 are at Rs 28,000 approximately. With just one month to go before the ear ends, the figure would not change dramatically as the current month would also witness fund manage taking a festival break for Christmas. Fresh allocation and fresh investments would determine the coue of action in the New Year.

Eye on Italy
After UK, it is the turn of Italy to seek a referendum on remaining with the EU. The referendum took place yesterday, results would probably be known by the time you read this. Tuesday sees RBI meeting for its policy review where a 25 basis point cut is given.

The possibility of a 50 basis points cut exists as the system is flush with money and post demonetization, inflation would be benign. While the market has discounted 25 basis points cut a 50 basis points cut would not be an unexpected piece of news, hence upside post RBI meet is ruled out. Markets would react negatively in either case as the old idiom goes: ‘Buy the rumour sell the fact’.

Markets are vulnerable currently; it makes sense to have a negative bias. Buying opportunities galore would be available and one should choose and buy stocks on a bad day. There is no hurry and a one would get bad days at the market on a number of occasions. Take your pick.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd

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

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