Right strings being pulled

Apr 13, 2015, 08:42 IST | Arun Kejriwal

All kinds of stocks are gaining with the government setting right one thing after another

The week gone by had plenty of action and markets were on a roll after an extended weekend. While the benchmark indices gained over 2 per cent each, action was witnessed in the midcap and smallcap indices which gained over 3 per cent and 6 per cent, respectively.

Narendra Modi is taking 'Make in India' to foreign lands, the Indian community abroad seems to approve as they are giving him a rock star welcome like this one in Hannover, Germany. PIC/PTI
Narendra Modi is taking 'Make in India' to foreign lands, the Indian community abroad seems to approve as they are giving him a rock star welcome like this one in Hannover, Germany. PIC/PTI

All kinds of stocks are gaining and the general feeling that retail participation is missing is being proved wrong. The market is buoyant and with the government setting right one thing after another we seem ready for a steady rise going forward.

Sensex gained 619.24 points or 2.19 per cent to close at 28,879.38 points while Nifty gained 194.10 points or 2.26 per cent to close at 8,780.35 points. The BSE100, BSE200 and BSE500 gained 2.52 per cent, 2.52 per cent and 2.61 per cent, respectively. The BSEMIDCAP gained 3.19 per cent while BSESMALLCAP gained 6.28 per cent.

Lifetime highs
Both these indices are at new lifetime highs. In sectoral indices, the biggest gainer was BSEMETAL up 5.68 per cent closely followed by BSEREALTY 5.66 per cent and BSEFMCG 5.01 per cent. There were no losers and the indices which gained the least was BSEBANKEX up 1.17 per cent.

In individual stocks, the gainers were led by Reliance industries up 8.26 per cent. Probably this name has appeared here after a very long time and just a couple of weeks back this stock was at its 52-week low. The other gainers were Dr Reddy up 7.74 per cent, Mahindra and Mahindra 6.74 per cent and Hind Unilever 5.56 per cent. There were few losers which were led by Lupin down 3.58 per cent, HDFC 3.30 per cent and ICICI Bank 1.44 per cent.

The last week saw the listing of two IPO’s Adlabs Entertainment and Inox Wind Energy. The former is trying to settle down around the issue price while the latter has gained a whopping 34 per cent from its issue price of Rs 325. The government divested 5 per cent in REC through its offer for sale which saw the retail portion being subscribed 9 times and the non-retail portion 4.66 times.

The cut off price at Rs 333.30 was way above the floor price of Rs 315 and even considering the discount of 5 per cent to retail the net price to them was Rs 316.65. The divestment in the first fortnight of the calendar year signifies the intent of the government to meet the divestment target of 60,000 crores plus. The success of REC should see more issues to follow and I would not be surprised if another OFS does not happen soon or as early as 5-10 days.

The IPO from VRL Logistics opens on Wednesday, April 15 and closes on Friday, April 17. The company is issuing shares in a price range of Rs 195-205 and would raise Rs 188 crores by way of a fresh issue and an offer for sale. VRL is a large transport company having 3,546 owned transport vehicles.

Shares offered
Shares are being offered at price earnings multiple of 18.62-19.58 times its nine months ended December 2014 earnings annualised on a fully diluted basis. It makes sense to apply for the minimum of one lot of 65 shares as the retail portion would get subscribed on lot basis. IIP numbers for February were at 5 per cent compared to 2.4 per cent in January.

There could be some aberration in them but the fact clearly remains that they are showing definite signs of improvement. RBI in its monetary policy kept rates unchanged on expected lines. In global markets, Dow Jones closed at 18,057.56 points, a weekly gain of 294 points or 1.66 per cent. Prime Minister Narendra Modi launched ‘Mudra Bank’ with a corpus of Rs 20,000 crores for the MSME sector.

This would go a long way in alleviating the hardships faced by the small and medium sector in India. The corporate law board also announced the merger ratio between NSEL and Financial Technologies as 3 shares of FT for every 8 shares of NSEL. FII’s were buyers of Rs 1,600 crores during the week and Rs 1,08,672 crores during the year April-March 2015.

This would translate into roughly 17.5 billion dollars. Domestic institutions were small sellers of Rs 130 crores during the week and buyers of Rs 40,078 crores during the year. Dow Jones gained 294.32 points or 1.66 per cent to close at 18,057.56 points. It’s quite some time that the index has been trading in a range of 17,700-18200.

The index needs to break out or break down for the next move. The Indian rupee gained 18 paisa or 0.29 per cent to close at Rs 62.31. The PM in his short visit to France has signed the Rafale fighter aircraft deal which was hanging fire for over seven years. There would be a further ‘Make in India’ component to the second part of the deal. The first part covers 36 aircraft to be delivered in about 2 years. Airbus is also to make aircraft for defence in India.

The week ahead has a trading holiday on Tuesday and real action would be on the three days thereafter. Results are still some time away and whilst markets would be choppy and volatile any discernible trend would emerge post results. Buy in dips and accumulate quality stocks as the gains in smallcap are disturbing.

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 http://ak57.in

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 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.

Go to top