Good rains and new highs would lead to further upside

NEW DELHI: Markets were on a roll last week and hit new lifetime highs. The rise was helped in no small way by the outbreak of monsoon in the financial capital and Maharashtra where there have been decent rains for the last 10 consecutive days.

BSESENSEX gained 1,739.19 points or 2.76 per cent to close at 64,718.56 points while NIFTY gained 523.55 points or 2.80 per cent to close at 19,189.05 points. The broader indices gained as well and saw the BSE100, BSE200 and BSE500 gain 2.70 per cent, 2.69 per cent and 2.59 per cent respectively. BSEMIDCAP gained 2.86 per cent while BSESMALLCAP was up 1.91 per cent. The benchmark indices gained on all the four trading sessions. The intraday highs were 64,768.58 points on BSESENSEX and 19,201.70 points on NIFTY.

The Indian Rupee remained unchanged against the US Dollar at Rs 82.04. Dow Jones had a great week gaining on three of the five trading sessions. It was up 680.17 points or 2.02 per cent to close at 34,407.60 points.

The week gone by saw two primary issues open and close for subscription. The first was IdeaForge Limited which was scheduled to be open between Monday the 26th of June to Thursday the 29th of June. With the change in holiday from Wednesday to Thursday, the issue had to be extended to Friday, as technically it could not close a day earlier than advertised on Wednesday. This saw the issue getting more response. The issue was subscribed 106.05 times overall. QIB portion was subscribed 125.81 times, HNI portion 80.58 times, Retail 85.25 times and Employee 96.57 times. There were 25.07 lakh applications in all. It appears some of the online brokerage firms bidding software had glitches and as a result Retail subscription was bid as employees. In case some remedial action is not taken, one would witness the highest percentage of technical rejection in this category.

The second issue was from Cyient DLM Limited which was open from Tuesday the 27th of June to Friday the 30th of June. The issue was subscribed 71.35 times overall with QIB portion subscribed 95.87 times, HNI 47.75 times and Retail portion was subscribed 52.14 times. There were 16.91 lac applications.

The issue from Senco Gold Limited is tapping the capital markets with its fresh issue of Rs 270 crore and an offer for sale of Rs 135 crore. The issue opens for subscription on Tuesday the 4th of July and closes on Thursday the 6th of July. The price band of the issue is Rs 301-317. The company as the name suggests is into the business of selling gold, diamonds and platinum jewellery besides gold and silver coins and also jewellery made from precious and semi-precious stones. The company is very strong in its presence in the Eastern part of India. Senco has 136 showrooms which includes 75 which are company owned and operated and 61 which are franchisee operated.

The company reported revenues of Rs 4,108 crore for the year ended March 2023. The company had a profit after tax of Rs 158.47 crore for the year ended March 2023. The EPS on a fully diluted basis was Rs 22.87. The PE multiple on this fully diluted basis EPS is an attractive 13.16-13.86 times. Considering its peer set, markets at lifetime highs, the price that the company is asking for its shares is fair and offers substantial scope for appreciation in the short to medium term as well.

FPIs have been investing quite heavily in the markets and that is adding fuel to the fire, leading to markets gaining on a sustained basis. The true test would be results which begin in about 7-10 days time from now. The expectation is that they would be better than the year ago and that is what the markets are betting on. One must also keep in mind that the confusion on the state of the monsoon seems to have partly reduced with a fair outbreak of the same.

The positive frame of the markets is seeing large stock sales by PE investors across companies. In most cases the size of the OFS is bigger than the size of the IPO which had come. There are some issues which seem to come across as noteworthy and raise many an eyebrow at the way they are done.

One such example was the recent OFS by Credit Access Grameen Limited. The company held its investor day event in Mumbai on the 18th of May where it presented its road ahead over the next five years. In less than six weeks after the event was held, the promoters of the company on Friday sold 90 lakh shares or 5.9 per cent of the equity through block deals. Their shareholding as of 31st March was 73.68 per cent. SEBI has made it mandatory for companies to disclose their share sale plan in advance before the beginning of any financial year. Not sure whether this information is publicly available and whether it was informed by way of public dissemination on the stock exchanges. On the face of it, it looks opportunistic with an eye on current market conditions.

In yet another case, the MD of Equitas SFB informed that he would not seek reappointment to the MD post and informed the same during a communication on 19th May 22. Share prices fell on expected grounds. One then found that domestic mutual funds like SBI, Sundaram, Canara and ICICI Prudential have increased their shareholding in the bank during September-October 22. Further one also gets to know that DSP acquired a 10 per cent stake in the bank during November 22 through an announcement to the exchanges. The icing on the cake is the surprise announcement in December 22 that the MD has decided to stay on as MD. On expected lines, share prices rise and all the mutual funds make a killing. Is this fair? Is this corporate governance? Is this not being unfair to small investors who have no access to information of high-level board changes? Should the regulator act on such information which is publicly available. One hopes that the chairperson of SEBI would look into these issues and have a fair and equal playing field for small and large shareholders.

June futures expired on a very positive note. The series ended on Wednesday the 28th of June with gains of 650.95 points or 3.55 per cent to close at 18,972.10 points. It was a great series for the bulls with the pressure of new lifetime highs being crossed or not, being on their head continuously.

In economic news, the GST collection for June 23 was at 1.61 lakh crore and was up 12 per cent. This is the 4th time that the figure has crossed 1.60 lakh. This indeed is a positive thing for the economy.

With effect from July 1. HDFC Limited has ceased to exist and is now merged with HDFC Bank. Trading in HDFC would continue till the 11th of July which would be the last trading day with 12th of July being the record date for merger.

Markets are seeing strange things happening with investors selling fixed income instruments like REITs and INVITs to invest in equity. The temptation to make a quick buck is visible and indicates the state of the market where expectation is to make 5-10 per cent weekly if not daily. It becomes imperative to now shift from midcap and Smallcap space to large cap all over again. There is safety in that segment and the pump and dump theory doesn’t work there either.

Coming to the markets in the week ahead, the US is closed on Tuesday the 4th of July. That could be a field day for bulls to take advantage of the holiday situation. Resistance in unchartered territory is difficult to forecast but using the 3 per cent formula, expect NIFTY to have resistance around 19,500 points and BSESENSEX around 65,400-65,500 points. On the support side, NIFTY has support around 18,550-600 points and BSESENSEX at 62,800-62,900 points. Markets would be choppy and volatile.

Trade cautiously.