Market momentum broken, expect further downside

NEW DELHI: The markets were in a sharp correction mode in the week gone by. The saving grace was that we had a holiday on Tuesday to welcome Lord Ganesh for his annual trip, otherwise things could have been even worse. Markets lost on all four days of the week.

BSESENSEX lost 1,829.48 points or 2.70 per cent to close at 66,009.15 points while NIFTY lost 518.10 points or 2.57 per cent to close at 19,674.25 points. The broader markets saw BSE100, BSE200 and BSE500 lose 2.51 per cent, 2.37 per cent and 2.33 per cent respectively. BSEMIDCAP lost 1.71 per cent while BSESMALLCAP was down 2.04 per cent. Markets saw many stocks register big losses. Amongst the benchmark indices, HDFC Bank lost Rs 133 or 8 per cent to close at Rs 1,529 while Reliance lost Rs 106 or 4.31 per cent to close at Rs 2,354. These two stocks broke the momentum and sentiment of markets as HDFC Bank’s fall hit Bank NIFTY badly.

The Indian Rupee gained 25 paisa or 0.30 per cent to close at Rs 82.93 to the US Dollar. Dow Jones lost on the last four days of the week consecutively and gained on just the first day. The US FED had met on Tuesday and Wednesday and decided to keep rates unchanged. They however were hawkish in their commentary and indicated that there would be at least one more hike before the calendar year ends. Dow Jones lost 654.40 points or 1.89 per cent to close at 33,963.84 points.

Primary markets seem to be having the best time of their lives seeing the number of issues opening. The week gone by saw five listings and three issues close for subscription. The week ahead sees three IPOs open and closing during the week.

The first of the listings was from Jupiter Lifeline Hospitals Limited which had issued shares at Rs 735. The share closed day one at Rs 1075.25, a gain of Rs 340.25. By the end of the week, the share saw some profit taking and closed at Rs 1,063.90 a gain of Rs 328.90 or 44.35 per cent.

The second share to list was on Wednesday (September 20) was from cable and wire maker R R Kabel Limited which had issued shares at Rs 1,035. The share ended day one at Rs 1,196.65. By the end of the week, there was some profit taking and the share closed at Rs 1,180.95, a gain of Rs 145.50 or 14.06 per cent.

The third share to list was EMS Limited which did so on Thursday (September 21). Shares were issued at Rs 211 and it closed day one at Rs 279.75. On Friday, it saw profit taking and closed at Rs 267.70, a gain of Rs 56.70 or 26.87 per cent.

The fourth share to list was Samhi Hotels Limited who had issued shares at Rs 126. The share closed on Friday at Rs 143.55, a gain of Rs 17.55 or 13.93 per cent.

The fifth share to list was Zaggle Prepaid Ocean Services Limited which had issued shares at Rs 164. After opening marginally lower, the share saw profit taking and closed even lower at Rs 158.30, a loss of Rs 5.70 or -3.48 per cent.

The issues which closed for subscription included Signature Global (India) Limited, Sai Silk Kalamandir Limited and Yatra Online Limited.

The issues which have opened include Manoj Vaibhav Gems ‘N’ Jewellers Limited which is tapping the capital markets with its fresh issue of Rs 210 crore and an offer for sale of 28 lakh shares in a price band of Rs 204-215. The company is an Andhra Pradesh and Telangana based hyper local jeweller with its flagship store in Visakhapatnam. The flagship store is spread over 30,000 square feet and accounts for roughly 62-65 per cent of the Rs 2,000 crore plus topline of the company. The company reported a PAT of Rs 71.69 crore and an EPS of Rs 18.32 for the year ended March 2023. Based on the above EPS, the PE for the issue is 11.13-11.73. The issue opened on Friday (September 22) and would close on Tuesday (September 26). The share is attractively priced compared to its peers.

The second issue is FMS or facility management services provider, Updater Services Limited which is tapping the markets with its issue in a price band of Rs 280-300. The issue consists of a fresh issue of Rs 400 crore and an offer for sale of 80 lakh shares. The issue opens on Monday (September 25) and closes on Wednesday (September 27).

The company is not into the high volume and low margin business of manpower services like some of its peers but provides services which is higher margins and lower volumes. The company reported adjusted EBITDA of Rs 145 crore for the year ended March 23. The EPS for the year was Rs 6.70 on a fully diluted basis. The PE for the company is 41.79-44.78 which looks higher optically. Considering that there are some adjustments under INDAS for the acquisitions done over the last couple of years, the PE would be lower if these considerations are taken into account.

While the business is good, the company does need to integrate the acquisitions and start benefiting from the same to show sustained results.

The final issue is from JSW Infrastructure Limited which is tapping the markets with its fresh issue of Rs 2,800 crore in a price band of Rs 113-119. The issue opens on Monday (September 25) and closes on Wednesday (September 27). The company is into ports and owns two ports currently. The company reported an EPS of Rs 4.01 on a fully diluted basis for the year ended March 23. Based on this EPS, the PE multiple is 28.18-29.68.

About half of the companies’ revenues come from group companies which acts as a solid support to the business. This ensures that the company is viable on its own and incremental traffic from third parties flows to the bottom line. The importance of inland transportation through waterways will help the company grow its business going forward. Investment in the company is warranted with a medium to long term time horizon.

Coming to the markets in the week ahead which sees September futures expire, markets would continue to remain volatile and choppy. With the losses in the week gone by, NIFTY futures in September series is now up a nominal 14.35 points or 0.07 per cent. The series had begun at 19,659.90 points. With four days to go, the bears have clawed their way back into the series and odds would be in their favour looking at the way the markets are poised.

The level of 19,600-19,650 on NIFTY is already there and with a little fall, the support would shift to 19,200-19,250 on NIFTY and 64,600-64,750 on BSESENSEX. The upside seems capped at say about 200 points on NIFTY and 600 points on BSESENSEX. The strategy for the week would be to sell on rallies and wait for sharp dips before any buying is attempted. The kind of primary paper hitting the markets is sucking out liquidity.

Trade cautiously.