Markets Shift Gears after Volatile Week


There was a lot of activity in the primary markets in the week gone by. The week saw two listings, three IPOs open and close for subscription and another three companies had their roadshows and would be opening their issues for subscription in the coming week…writes Arun Kejriwal

It was a wild, volatile and eventful week which got extended into Saturday as well. Expiry happened on February 29, which was a leap day and till that event was over, markets were trading in negative territory for the week. Friday was the turning point and markets went into a new orbit all over again.

Testing for the disaster recovery site of the exchange happened on Saturday and that led to the benchmark indices adding some more points to their ever-growing stature. At the end of it all, markets gained on four of the six trading sessions and lost on two. BSE Sensex was up 663.35 points or 0.91 per cent to close at 73,806.15 points while Nifty gained 165.70 points or 0.75 per cent to close at 22,378.40 points.

The broader markets saw BSE 100, BSE 200 and BSE 500 gain 0.67 per cent, 0.64 per cent and 0.53 per cent respectively. BSE Midcap gained 0.07 per cent while BSE Smallcap was down 0.39 per cent.

BSE Sensex, which was lagging Nifty in terms of making a new high, did so on Friday and made a new high at 73,819.21 points. It again crossed this level on Saturday and made a new high at 73,994.70 points.

Nifty climbed to new highs on Friday and Saturday and the new lifetime intraday high now stands at 22,419.55 points. Incidentally the gains of Friday were a massive 1,245 points on BSE Sensex and at 356 points on Nifty.

In relation to the weekly gains this was almost double when compared to BSE Sensex and a little more than double in terms of Nifty. Clearly shows what the first day of a new series and news of the GDP in the third quarter growing higher than expectations can do to the markets.

The Indian Rupee gained 4 paisa or 0.05 per cent to close at Rs 82.90 to the US Dollar. Dow Jones had a fairly quiet and range bound week. It gained on two of the sessions and lost on three. At the end of the week, it was down 44.15 points or 0.11 per cent to close at 39,087.38 points.

In economic news, FPIs bought shares worth Rs 5,107 crore in February after being net sellers of over Rs 25,000 crore in January. Further, GDP numbers for Q3 of FY23-24 came at an impressive 8.4 per cent. This was probably the reason why markets catapulted on Friday and virtually went into a new orbit.

February futures expired on a weakish note in the last week of the series. The series ended with gains of 630.20 points or 2.95 per cent to close at 21,987.38 points.

There was a lot of activity in the primary markets in the week gone by. The week saw two listings, three IPOs open and close for subscription and another three companies had their roadshows and would be opening their issues for subscription in the coming week.

The first company to list was Juniper Hotels Limited which listed its shares on Tuesday, February 27. The company had issued shares at Rs 360 and the issue was not very well received. The share opened at Rs 361.20 and closed 10 per cent higher at upper circuit at Rs 397.30. At the end of the week, the share had gained strongly, closing at Rs 484.85, a gain of Rs 124.85 or 34.68 per cent.

The second share to list was GPT Healthcare Limited which had issued shares at Rs 186. The share debuted on the bourses on Thursday, February 28. The discovered price was Rs 216.15 and the share closed day one at Rs 200.75, a gain of Rs 14.75 or 7.93 per cent. Over the next two days, the share lost ground and closed at Rs 191.75, a gain of Rs 5.75 or 3.09 per cent.

The first issue to open and close for subscription was Platinum Industries Limited which had tapped the markets with its issue for Rs 235.32 crore in a price band of Rs 162-171. The issue was oversubscribed an overall 98.73 times with QIB portion subscribed 151 times, HNIs 141.69 times and Retail portion subscribed 50.45 times. There were 32.85 lakh applications in all.

The second issue was Exicom Tele-systems Limited which had tapped the markets with its fresh issue for Rs 329 crore and an offer for sale of 70.42 lakh shares in a price band of Rs 135-142. The issue was subscribed 129.19 times. The QIB portion was subscribed 121.80 times, HNI portion was subscribed 153.04 times and Retail portion was subscribed 117.83 times. There were 36.79 lakh applications in all.

The third issue was from Bharat Highways Invit. The price band was Rs 98-100. The issue size was Rs 2,500 crore of which 15 per cent was allotted to the sponsor. The issue was subscribed 8.18 times overall with the QIB portion subscribed 9.1 times and Non QIB portion subscribed 7.07 times. There were 2.17 lakh applications in all.

The week ahead has three IPOs opening. The first is from R.K. Swamy Limited which is tapping the markets with its fresh issue for Rs 173 crore and an offer for sale of 87 lakh shares in a price band of Rs 270-288. The issue will open on Monday, March 4, and close on Wednesday, March 6. The company is into the business of integrated marketing communications and operates a full-scale advertising agency and market research business verticals.

The company has over five decades of presence. It reported revenues of Rs 780 crore for the year ended March 23 on a gross basis and a net revenue of Rs 300 crore. Its EBITDA margins were 20.97 per cent and PAT margin at 10.42 per cent. There is cyclicality in the business of the company and broadly speaking roughly 40 per cent of its revenues come in the first half and 60 per cent in the second half. Profitability is even more skewed and the company in my opinion earns about 25 per cent of profits in the first half and 75 per cent in the second half.

The company had an EPS of Rs 7.03 for the year ended March 23 and based on this EPS the PE multiple for share is 38.41-40.96. The company has its niche and is one of the leading companies in the advertising space standing up against the MNCs and doing well. The market research gives it the cutting edge. One should invest in the company for medium to long term gains while making some listing pop could always happen.

The second share to tap the markets is JG Chemicals Limited. The issue would open on Tuesday the 5th of March and close on Thursday, March 7. The price band is Rs 210-221. The company is the largest producer of Zinc Oxide in the country. Its products are used in the tyre and rubber industry and J.G. Chemicals in a leading supplier to tyre manufacturers in the country and globally as well. The company has plants in Kolkata and in Naidupeta in Andhra Pradesh.

The company reported revenues of Rs 795 crore for the year ended March 23. Its EPS was Rs 17.32 and the resultant PE for the issue is 12.12-12.76. While there are listed players in the segment, they are smaller compared to the company. The company offers appreciation for investors looking to invest with a medium-term outlook as the company has diversified and added products in the pharmaceutical and agricultural space as well.

The third company tapping the capital markets with its offer for sale is Gopal Snacks Limited. The issue opens on Wednesday, March 6, and closes on Monday, March 11. The price band of the issue is Rs 381-401. The company is a manufacturer and marketer of ethnic Indian snacks, gathiya and western snacks. The company is located in Rajkot with two plants in Rajkot and near Ahmedabad and one plant in Nagpur.

The company reported revenues of Rs 1,394 crore for the year ended March 23, an EBITDA margin of 14.07 per cent and a PAT margin of 8.06 per cent. The profit after tax was Rs 112 crore. The EPS for the year ended March 23 was Rs 9.03 and the PE multiple at 42.24-44.46. The company compares favourably with its listed peers like Pratap Snacks and Bikaji Foods.

The company is present in ten states and two Union Territories with Gujarat being the largest state in terms of sales. It has 617 distributors as of date and is looking to expand its footprint. The sales distribution in terms of products having a MRP of Rs 5 is 75 per cent while that of Rs 10 is 8.23 per cent. This gives the company an edge that the number of people who buy their products repeatedly is very high.

A price point of Rs 5 ensures a decent snack for the customer of hygienic food which is properly packed and served in a safe and hygienic condition. The share offers appreciation in the short and medium term, and could give a listing pop for the flippers.

Coming to the markets in the coming week, there is a trading holiday on Friday the 8th of March. This would reduce the week to a four-trading session and also ensure that irrespective of the outcome of the trading sessions, there would be profit taking and lightening of positions on Thursday, ahead of the trading holiday.

Markets got a booster dose on Friday and they now have the momentum to build further on it. Expect markets to continue to move up and aim for the 35 spill over from the January highs. Targets would be about 22,750 on Nifty and 75,600 on BSE Sensex. These are levels which become targets for the indices to reach. Markets have support at levels of 21,900 on Nifty and at 72,100 on BSE Sensex. This becomes the operating range for the markets.

The strategy for the week would be to continue to focus on large cap stocks and book profits in small and midcap space. There is a certain amount of index management happening with Reliance Industries and HDFC Bank being the favourite big boys.

Whenever markets look weak, these stocks are pulled up to give the feeling that all is well. While talks of a correction keep on coming, the mood is optimistic, momentum favours the bulls and markets need news flow to correct. Till then ride the rally.

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