Ride the tide

US Treasury Secretary Steven Mnuchin right is seen shaking hands with Finance Minister of India Arun Jaitley before a bilateral meeting during the World BankIMF Spring Meetings in Washington over the past weekend PicAPPTIThe benchmark indices did virtually nothing last week and were flat for all practical purposes However there was plenty of action in the midcap and smallcap space where prices seem to rise and rise without any let up The BSESENSEX lost 9615 points or 0335 to close at 2936530 points NIFTY lost 3140 points or 034 per cent to close at 911940 points The broader markets saw BSE100 BSE200 and BSE500 gain 003 per cent lose 007 per cent and gain 0145 respectively BSEMIDCAP was up 095 per cent and BSESMALLCAP 192 per centIn individual stocks the top gainer was DLF up 14405 followed by GAIL 559 per cent and HDFC Bank 399 per cent The losers were led by Sun Pharma down 751 per cent followed by Coal India 473 per cent ICICI Bank 451 per cent and Axis Bank 412 per centA little slipThe Dow Jones gained 9451 points or 046 per cent to close at 2054776 points After recording sharp gains over the last three four weeks the Indian Rupee lost some ground losing 20 paisa or 031 per cent to close at Rs 6461All the action happening is in the midcap and smallcap space Nobody has any complaints on this front because the retail has more interest in this segment than in the large cap space It would be a completely different ballgame considering that many stocks from this space which are moving are doing so after a gap of three to five yearsIts rolling onThe current rally began in the last week of December 2016 and is currently almost five months old During this period the BSESENSEX gained 3558 points or 1378 per cent from 25807 to the current level NIFTY gained 1211 points or 1531 per cent from 7908 to 9119 points BSEMIDCAP gained 2785 points or 2379 per cent from 11702 to 14487 points BSESMALLCAP was the star gaining 3618 points from 11548 to 15166 points Looking at the same in a different perspective is that the BSEMIDCAP gained almost double of what the SENSEX gained and almost 25 times what the BSESMALLCAP gainedTime and again it has been seen that the midcap and smallcap indices are slow starters and then they gather steam as the juggernaut rolls on Almost all rallies end with these two indices going berserk and markets then correcting very sharply Currently the early signs of markets topping out are yet not visible and therefore one may enjoy the current rallyAnd its ChandThere is an IPO nest week from S Chand and Company Limited The company is a publisher and is well known for the text books it publishes One of the most popular books that comes to mind is Wren amp Martin the English grammar book that almost all of us would have used in school The company would raise Rs 325 crore from a fresh issue and an offer for sale of 6023 lakh shares in a price band of Rs 660670 The company reported revenues of Rs 540 crore and profit after tax for the year ended March 2016 of Rs 493 crore The revenue for the nine months ended December 2016 was Rs 150 crore and a net loss of Rs 8678 crore The business is highly cyclical and almost 75 per cent of the top line comes in the fourth quarter JanuaryMarch The company has acquired in December 2016 the business of Chhaya from West BengalThe company would achieve a turnover of between Rs 680720 crore for the year ended March 2017 based on back of the envelope calculations This would include revenues from the recently acquired Chhaya We have in the recent past had a number of issues in the education space but unfortunately investors have not made any money in the same This company looking at the response from HNIs and the funding cost and grey market premiums is indicating that there are listing gains to be made for even the leveraged HNI The retail portion would be oversubscribed and it would be the lucky investors who receive allotment who would benefitGo either wayApril series futures expires on Thursday April 27 The current value of NIFTY at 911940 is down by 5435 points or 059 per cent compared to the previous month This is neither advantage to bulls or bears and the series could go either way With bulls ruling the roost in the last three months bears would be looking to press the advantage home One is likely to see higher volatility as we approach expiry The following week begins with a holiday on Monday and the long weekend would bring about a reduction in open interest post the expiry and the new series beginning A new product called InvITs would be launched in the coming days InvITs are Trusts which issue Units against underlying revenue generating infrastructure assets which has achieved COD and been generating revenues since at least one year InvITs ensure steady revenues to the holders of the units on more or less assured returns basis 90 per cent of the distributable cash flow from the assets have to be distributed minimum twice in a year This distribution makes for better returns than fixed depositsRide the rallyThis product would have unique appeal for retail investors where there are features of a debt instrument with decent returns and virtually no risk of downward interest rates The assets are matured and therefore carry virtually no execution risk It is highly liquid as it would be traded on the stock exchanges Such products would be offered in similar fashion by infrastructure cos transmission lines and also real estate rental companies The issue lot would be Rs 10 lakh and the trading lot would be Rs 5 lakh This effectively means there would be no retail subscription during the initial offeringMarkets are looking tired and going nowhere With action in the midcap and smallcap space market momentum would continue Do ride the rally as there is some distance to go yetArun Kejriwal is founder of the Mumbaibased advisory firm Kejriwal Research amp Investment Services Pvt LtdDisclaimer 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