Having a party

Mar 20, 2017, 03:22 IST | Arun Kejriwal

Significant gains and remarkable highs marked a terrific truncated week

State Finance Minister Sudhir Mungantiwar and Deepak Kesarkar show the state budget before entering Vidhan Bhawan in Mumbai on the weekend. Pic/PTI
State Finance Minister Sudhir Mungantiwar and Deepak Kesarkar show the state budget before entering Vidhan Bhawan in Mumbai on the weekend. Pic/PTI

It was party time at the bourses and they gained significantly in the four day trading week. While the BSE SENSEX made two-year highs, NIFTY made a lifetime high. More importantly, the markets closed with the momentum intact and around the high of the week. The BSESENSEX gained 702.76 points or 2.43 per cent to close at 29,648.99 points, while NIFTY gained 225.50 points or 2.52 per cent to close at 9,160.05 points. The broader indices saw the BSE100, BSE200 and BSE50 gain 2.79 per cent, 2.85 per cent and 2.86 per cent respectively. BSEMIDCAP gained 3.95 per cent while BSESMALLCAP gained 3.00 per cent.

The top sectoral gainer was BSEREALTY up 5.34 per cent followed by BSEFMCG 4.70 per cent, BSECONDUR 4.44 per cent and BSEBSECAPGOOD 4.28 per cent. There were no sectoral losers but the one that gained the least was BSETECK up 0.85 per cent. In individual stocks the top gainer was Tata Steel up 7.32 per cent followed by SAIL 7.09 per cent, Hero Moto 7.06 per cent, ITC 6.82 per cent and BHEL 6.55 per cent. On the losing side were Coal India down 8.47 per cent followed by Bharti Airtel 4.93 per cent. Even though Coal India was a big loser, it was more of a technical reason as the company had declared an interim dividend of Rs 18.75 and the stock went ex-dividend at the beginning of the week. Net loss in the stock was Rs 26.80.

Has some momentum
The intraday highs achieved during Friday's trading was 29,824.62 points on the BSESENSEX and 9,218.40 points on the NIFTY. The current market momentum is strong and there is quite a bit of shorts still out there. Going forward, this needs to be cut before the markets complete their leg of rally. If one recollects the current rally is almost three months old. It started on December 26, 2016 from a low of 25,807 and gained 3,841 points or 14.88 per cent to reach a level of 29,648 points. Similarly NIFTY began from a level of 7,908 and gained 1,252 points or 15.83 per cent to reach 9,160.05 points. Markets have gained the customary 13-15 per cent in a mere three months. This rally has been quite swift and a large part of the same was when there was disbelief.

The US Fed increased rates on expected lines by 25 basis points and the Dow Jones and global markets responded positively to the announcement and gained ground. At the end of the week though, the Dow was flat having gained a mere 11.64 points or 0.06 per cent to end at 20,914.62 points. The Indian Rupee was a big gainer during the week and was up Rs 1.14 or 1.71 per cent to end at Rs 65.46.

A lot of action
The week ahead has plenty of action in the primary market with two new issues opening and closing and the listing of Avenue Supermarts Limited which runs the chain of stores under the D-Mart brand. This issue was to raise Rs 1,870 crore and the issue garnered Rs 1.39 lakh crore. The retail portion saw a new record of close to 18.5 lakh applications being received. The first issue which opens from Monday, March 20 and closes on Wednesday, March 22 is from C L Educate Limited. The company through a combination of fresh issue and offer for sale is looking to raise between Rs 238-239 crore in a price band of Rs 500-502. The company is into the space of education and the company provides technology enabled education products, services, content and infrastructure.

The company had generated revenues of Rs 296.68 crore in the year ended March 2016 and Rs 160.69 crore in the six months ended September 201. The profit after tax was Rs 21.67 crore and Rs 12.91 crore respectively. This translates into an EPS of Rs 17.71 and six months ended September 2016 on an annualized basis to Rs 21.54. The PE multiple based on this is 28.34 times for March 2016 and 23.30 times based on six months annualised basis. This sector has not generated returns for the investor. It makes sense to avoid the issue currently and look at it once the schools and college are sold and money realised.

A second look
The second issue is from Shankara Building Products Limited which opens on Wednesday, March 22 and closes Friday, March 24. The issue comprises a fresh issue to raise Rs 45 crore and an offer for sale of 65.21 lakh shares. The price band is R 440-460 and the company would be raising Rs 332 crore to Rs 345 crore. As of December 31, the company operated 103 stores across nine states and one territory. The company being headquartered in Bengaluru is very strong in the five southern states and one union territory. The company has three verticals which are channel trade, enterprise sales and retail sales with retail enjoying the highest margins. The EPS based on March 2016 earnings would be Rs 18.88 translating into a PE ratio of 23.30-24.3. If one were to annualise the nine months results the EPS would be Rs 25.32 and the PE band 17.37-18.76. The week ahead would see greater volatility compared to the previous week and news highs as well. It makes sense to book profits in the rising market and wait to re-enter when the same corrects.

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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