Markets gone wild

Mar 28, 2016, 07:34 IST | Arun Kejriwal

Calculation of net asset values of mutual funds, expiry to hit markets this week

Markets began the last week with a flourish and had a strong rally on Monday. They gained further subsequently and closed the week with gains of 384.82 points or 1.54 per cent on the BSE Sensex. The index ended at 25,337.56.

The Nifty gained 112.15 points or 1.47 per cent to end at 7,716.50. The broader markets —BSE100, BSE200 and BSE500 — gained 1.58 per cent, 1.63 per cent and 1.65 per cent, respectively. The BSE mid-cap was up 2.18 per cent and BSE small-cap rose 1.87 per cent. The top sectoral gainer was BSEREALTY, up 4.29 per cent. Other gainers included BSECAPGOODS at 3.71 per cent, BSEAUTO at 2.86 per cent and BSEMETAL at 2.82 per cent.

There were no losers and the ones to gain the least were BSEOIL&GAS at 0.34 per cent and BSEFMCG at 0.42 per cent. Among individual stocks, the top gainer was DLF up 7.46 per cent, followed by Hindalco at 7.23 per cent, Tata Power at 7.19 per cent, SAIL at 5.48 per cent and Vedanta at 5.33 per cent. The losers were led by Dr Reddy’s, down 3.88 per cent and followed by Lupin at 2.18 per cent. The rupee lost 14 paise or 0.21 per cent to close at Rs 66.64. The Dow lost 86.65 points or 0.49 per cent to close at 17,515.73.

The week ahead sees an expiry of March futures. The current value of Nifty is higher by 745.90 points or 10.70 per cent with bulls enjoying gains. Whether they are able to extend their gains or give up some of it would be keenly watched ahead.

IPO action
In the primary market, two initial public offerings (IPOs) were seen, which closed last week. Bharat Wire Ropes raised R 70 crore in a price band of Rs 40-45 with the IPO being subscribed 1.21 times. The QIB portion was subscribed 1.01 times, HNI (high net worth individuals) 2.02, and retail was subscribed 2.08 times.

The other issue was e-commerce player, Infibeam, which raised Rs 450 crore in a price band of Rs 360-432. It was subscribed at the top end of the band of Rs 432. This was an issue where 75 of the book was reserved for QIBs and that portion had to be necessarily subscribed for the issue to go through.

The company received bids from QIB’s for 80.29 lakh shares, which, at Rs 432, would amount to Rs 346.85 crore. This amounts to 102.77 per cent or 1.02 times the QIB portion. The other buckets saw subscription of 2.23 times in HNI and 1.31 times in retail. However, not a single domestic mutual fund opted to subscribe for the IPO. With record inflows into mutual funds and particularly those funds which look at small and mid-cap companies, this was a shocker.

After the listing of Infibeam, the e-commerce space would see a down-rating of sorts when people start questioning the burning of cash and huge losses being reported by the players. Oncology hospital company, Healthcare Global Enterprises, will also be listed during this week. This issue was subscribed, but somehow was not fancied and the year end could have played a role in the same. The company had raised about Rs 600 crore through primary and secondary issues in R 205-218 price band.

Dividend Rush
The fortnight has seen large number of dividends being declared and distributed to beat the tax of 10 per cent being levied in the new financial year on dividend amount in excess of R 10 lakh on the recipient.
PSU companies have also been declaring dividends. In many cases, one finds that share prices have moved significantly on a cum dividend basis, only to fall post the dividend adjustment. Going forward, dividends in the period August to October 2016 would reduce to a trickle.

Markets have had a good run post the Budget. From the lows of 22,600, markets have gained in excess of 2,700 points or almost 12 per cent. It’s a big rally and has been fuelled by FIIs in a large way. Valuations are currently no longer cheap and the expected turnaround in fortunes of corporate India is yet to happen.

Markets will continue to be choppy into the fag end of the current financial year. There would be some wild movements on the March 31, when NAVs (net asset value) of funds are computed, which also coincide with March futures expiry. Use any sharp upward movement to exit positions

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.

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