Expect consolidation post sharp rally

NEW DELHI: The week post-election results have pushed the markets into a new orbit. The resistance around the highs made on September 15 were broken and overcome in one shot and we are now on the threshold of new milestones just waiting to be touched and then broken. It may be said that markets now have fresh legs and also wings to help it to move ahead over the next couple of quarters.

Markets gained on four of the five trading sessions and lost on one. At the end of what could be termed an eventful week, BSE Sensex gained a massive 2,344.41 points or 3.47 per cent to close at 69,825.10 points while NIFTY gained 701.50 points or 3.46 per cent to close at 20,969.40 points.

The broader markets saw BSE 100, BSE 200 and BSE 500 gain 3.42 per cent, 3.55 per cent and 3.29 per cent respectively. BSE Midcap was up 2.04 per cent while BSE Smallcap was up 1.33 per cent. The intraday highs made were 69,893.80 on BSE Sensex and 21,006.10 on NIFTY.

The Indian Rupee lost 9 paise or 0.11 per cent to close at Rs 83.38 to the US Dollar. Dow Jones had a flat as a doormat close gaining a mere 2.37 points or 0.01 per cent at 36,247.87 points. Dow lost on three of the five sessions and gained on two.

Markets post the election results have been in a buoyant mood and gained across sectors. The one sector which did not participate in the rally during the week was BSE FMCG which lost a tad and was down 0.35 per cent. All other sectors were positive and one saw the likes of Reliance Industries and HDFC Bank which had been laggards earlier, chipping in with handsome gains. HDFC Bank gained 6.23 per cent during the week to close at Rs 1,653 while Reliance Industries with gains of 2.63 per cent closed at Rs 2,456. The movement of these two stocks has brought about a new momentum in the markets as well.

In economic news, RBI in its bi-monthly policy review meeting kept repo rates unchanged at 6.5 per cent. It also maintained the stance. The GDP growth forecast rate number was however raised from 6.5 per cent to 7 per cent.

The week ahead has two IPOs opening and closing for subscription during the week. The first of the issues is DOMS Industries Limited which is tapping the markets with a fresh issue of Rs 350 crore and an offer for sale of Rs 850 crore. The issue opens on Wednesday (December 13) and closes on Friday (December 15). The price band is Rs 750-790. The company is a manufacturer of a wide range of stationery and art products under the brand name DOMS which are sold in India and over 45 countries in the world.

The company reported revenues of Rs 1,216.52 crore for the year ended March 23 which have improved further to Rs 764.21 crore for the six months ended September 23. The profit after tax was Rs 102.87 crore for the full year and Rs 73.9 crore for the half year. The EPS on a fully diluted basis is Rs 18.29 for the full year and Rs 13.14 for the six months. The PE multiple on earnings for March 23 is 41.01-43.19. The issue is attractive and as an added comfort for investors has a very active and high grey market premium as well. The issue merits subscription though allotment would be tough as the retail portion is only 10 per cent of the issue size.

The second issue is from India Shelter Finance Corporation Limited which is tapping the markets with its fresh issue of Rs 800 crore and an offer for sale of Rs 400 crore. The price band of the issue is Rs 469-493 and the issue would open on Wednesday (December 13) and close on Friday (December 15). The company, as the name suggests, is in the business of providing loans for affordable housing. It has an AUM of Rs 5,180 crore as of September 30. Among the peer set mentioned by the company, the others have a higher AUM at Rs 7,603 crore for Aptus Value, Rs 8,365 crore for Home First and Rs 15,319 crore for Aavas Financers. The way this business is tracked is price to book or P/B which is 4.6 for Home First, 3.6 for Aavas Financers and 4.5 for Aptus.

The markets are again getting ready for a spate of issues in the coming days before Christmas comes and there would be a wide variety on offer. One may look at the existing listed shares in the housing finance space as better opportunities may lie there.

Coming to the markets in the week ahead, we have had a sharp rise in the previous week and markets must consolidate in the coming week. The levels on the upside could be between 21,100-21,150 on Nifty and 70,300-70,450 on BSE Sensex. On the downside there could be some sharp corrections due to profit taking and support exists at levels of 20,600-20,650 on Nifty and at 68,850-69,000 on BSE Sensex. The trading strategy would be to use rallies to sell and book profits. Without correction in the markets, fresh long positions may be avoided.

The markets have a long way to go and the ensuing rally would be something for 5-6 months. One will need to be patient to profit from this rally. Do not be in a hurry to make money. Be patient and ride out the rally.

In conclusion, wait for a correction and consolidation in the coming week.