Markets holding but no clarity on breakout

NEW DELHI: Markets were choppy and volatile in the week gone by. They did recover from the previous week’s lows and staged some sort of a rally, but are yet to get out of the woods completely. The super sharp rally in the US was not enough to change the sentiment completely in our markets.

BSE SESENSEX gained 580.98 points or 0.91 per cent to close at 64,363.78 points while NIFTY gained 183.35 points or 0.96 per cent to close at 19,230.60 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.27 per cent, 1.33 per cent and 1.39 per cent respectively. BSE MIDCAP was up 2.00 per cent while BSE SMALLCAP was up 1.90 per cent. Markets gained on three of the five sessions and lost on two.

The Indian Rupee lost 4 paisa or 0.05 per cent to close at Rs 83.28 to the US Dollar. Dow Jones had a stellar week and gained on all five sessions of the week. Dow Jones gained 1,643.73 points or 5.07 per cent to close at 34,061.32 points. The Fed in its meeting during the last week decided to keep interest rates unchanged. The possibility of there being another rate hike during the remaining part of the calendar year still remains, and could yet happen.

In the Israel-Hamas conflict, Israeli forces are encircling Gaza and the conflict is showing no signs of abating or slowing down. Hostages have not been released and therefore the possibility of a slowdown in the war is virtually ruled out. The world is watching very carefully the situation and one hopes the escalation does not become a widespread event encompassing neighbouring countries as well.

The primary markets saw a lot of action in the week gone by. We saw two issues open for subscription and close while yet another has opened for subscription. There was also one issue which listed during the week gone by. In the week ahead we have two issues opening for subscription. One other issue has opened for subscription and would be closing in the coming week. Two issues which had closed in the previous week would be listing as well.

The first issue to open and close was from Cello World Limited. The issue was subscribed 38.90 times overall with QIB portion subscribed 108.57 times, HNI portion subscribed 24.42 times and Retail subscribed 3.06 times. This is the most subscribed issue on the main board in recent times and has created new records of subscription and amount garnered. The issue was for Rs 1,900 crore

The second issue to open and close for subscription was Honasa Consumer Limited which was subscribed 7.61 times overall with QIB portion subscribed 11.50 times, HNI portion subscribed 4.02 times, and Retail portion subscribed 1.34 times. There were 1.19 lakh forms in all.

The issue from Blue Jet Healthcare Limited listed on Wednesday the 1st of November. The company had allotted shares at Rs 346. The share debuted at Rs 359.80 on BSE on the opening day and closed at Rs 395.45, a gain of Rs 49.45 or 14.29 per cent. At the end of the week, the share lost some ground and closed at Rs 390.70, a gain of Rs 44.70 or 12.92 per cent.

The issue from ESAF Small Finance Bank Limited which is tapping the capital markets with its fresh issue of Rs 390.70 crore and an offer for sale of 72.30 crore in a price band of Rs 57-60. The issue opened on Friday the 3rd of November and would close on Tuesday the 7th of November.

The company as the name suggests is a small finance bank and reported an EPS of Rs 6.71 on a fully diluted basis for the year ended March 23. The PE band for the share is 8.49-8.94. The share is reasonably valued and offers scope for appreciation in the short to medium term as well. The issue is oversubscribed 1.95 times on the very first day itself.

The second issue is from Protean EGOV Technologies Limited, who is the pioneer and market leader in universal, citizen-centric and population scale e-governance solutions. It has 25 years’ experience in creating digital public infrastructure. The company is tapping the capital markets with its offer for sale of 61.91 lakh shares in a price band of Rs 752-792. The issue would open on Monday the 6th of November and closes on Wednesday the 8th of November.

The company had earned an EPS of Rs 26.48 on a fully diluted basis for the year ended March 23. The PE ratio for the issue is 28.40-29.91. One of the selling shareholders is IIFL Special Opportunities Fund who had invested at a price of Rs 950.10 some 6-7 years ago. The fact that this fund has not made money and is partly exiting the company at this price making a loss is comforting for investors, as it gives the signal that the company has been revalued based on its present business and performance. Looking at the pace of digitisation in India and the widespread use of the same, there is scope for appreciation.

The third company to tap the markets is ASK Automotive Limited which is tapping the markets with its offer for sale of 295.71 lakh shares in a price band of Rs 268-282. The issue opens on Tuesday the 7th of November and closes on Thursday the 9th of November.

The company is into the business of making auto components which consist of advanced braking systems and aluminium die casting engineered products for 2 and three wheelers, passenger and commercial vehicles and non-automotive sector. The company reported revenues of Rs 2,555.16 crore for the year ended March 23 and a profit after tax of Rs 122.95 crore.

The company’s performance is comparable with its peers like Endurance Technologies, Uno Minda, Suprajit Engineering and Bharat Forge Limited. The EPS on a fully diluted basis for March 23 was Rs 6.18. The PE band at these earnings is 43.37-45.63. The company is expanding its facilities as capacity utilisation is quite high even though this issue is entirely an offer for sale. Investment in the company is warranted for the medium to long term.

Shares of Cello World Limited would list on Monday the 6th of November while those of Honasa Consumer Limited would list on Tuesday the 7th of November. While Cello World is expected to deliver strong gains and have a good listing, the market is divided on how Honasa would fare.

Coming to the markets in the week ahead, expect volatile and two-sided sharp movements. While the strong showing of Dow Jones which registered over 5 per cent gains in the previous week would hopefully have some bearing, it has not done so. The high that NIFTY has made in the present up move is 19,276 points. For the uptrend to become meaningful and sharp, we need to cross the previous low of 19,333 points made a month ago and sustain that. The situation in the Israel-Hamas conflict is just not conducive at the moment to see such an event happening. It therefore makes sense to take things one step at a time. At current levels the markets have support at levels of 18,900-18,950 and they have some resistance at 19,333. If the above level is violated and sustained, we could see levels of 19,600-19,650 as well.

The week ahead sees ‘Muhurat’ trading for Vikram Samvat year 2080 taking place on Sunday the 12th of November. Markets would have a special session between 6 p.m. and 7.15 p.m. on Sunday.

Wishing all my readers a Happy Diwali and a prosperous Samvat 2080.

Trade cautiously and profitably.