Markets trying to make a bottom

By Arun Kejriwal

After a tough and volatile week one expected markets to consolidate. Unfortunately, while in the first four days of the week they did exactly that, Friday saw yet another sell-off and caused markets to slip into the red. The BSE SENSEX lost 720.67 points or 1.88 per cent at 37,576.62 points while NIFTY lost 212.30 points or 1.90 per cent to close at 10,989.45 points. The broader markets saw the BSE 100, BSE 200 and BSE 500 lose 1.72 per cent, 1.77 per cent and 1.86 per cent, respectively. The BSE MIDCAP lost 2.55 per cent, while BSE SMALLCAP was down 2.77 per cent.

The Indian rupee was under severe pressure and lost Rs 1.50 or 2.08 per cent to close at Rs 73.72 to the US dollar. Dow Jones after a choppy and wild week gained 278.51 points or 1.10 per cent to close at 25,687.87 points. Indian Markets gained on two days during the week and lost on three days.

The COVID-19 outbreak continues to be in the news all over the world. While the same is now spreading to new geographies, it seems to be coming under control at the source of the problem, China. People who were the initial victims of the virus are recovering. Wuhan, the epicentre of the outbreak which had become a ghost town, is reopening. Many people seem to have found a cure for the virus but there is no confirmed news of the same. One thing is for sure that the virus is coming under control, though there would be new cases erupting in a sporadic manner. Many countries have issued travel advisory for people visiting certain countries and also set up screening centres for people coming from certain affected countries. On a lighter note spot fares have crashed on many routes and air tickets are available at around half their normal value.

Yes Bank was in the news on Thursday and Friday. On Thursday the share saw its price rise from Rs 29.30 to Rs 36.80 on volumes of 78.47 cr shares on NSE in the cash market. That evening the Reserve Bank of India (RBI) and the government announced that SBI would infuse capital into the bank and take a stake of 49 per cent. Restrictions on withdrawal were also put in place. The next day, Yes Bank shares were on a roller coaster ride and fell from Rs 36.80 to Rs 5.65 before recovering to close at Rs 16.20. The fall was Rs 20.60 or 53.11 per cent on volumes of 126.49 cr shares. The traded value on Friday of Rs 1,865 cr was more than 45 per cent of the full market cap of the company. This does not take into account the derivative traded value or the volume on BSE. The developments on the company have begun on a very fast pace and the former founder is being questioned in connection with loans to DHFL and some other borrowers.

The long-awaited primary market issue from SBI Card was subscribed 26.49 times overall. The QIB portion was subscribed 56.66 times, HNI portion 45.24 times, Retail portion 2.5 times, Employee portion 4.74 times and Shareholder portion 25.36 times. HNI's were allowed to bid in shareholder category which caused cannibalising of the bucket and much heartburn as well. It maybe mentioned that the merchant bankers advised the company for doing this citing that in the case of SBI Life Insurance issue in September 2017, the shareholder bucket remained undersubscribed. What they did not mention is the fact that in that issue, the HNI portion and Retail portions were also undersubscribed. With small shareholders of SBI Bank feeling let down in the issue of SBI Card, one hopes that the regulator and also the promoter of SBI Card take corrective action in future issues.

The issue from Antony Waste Handling Cell Limited was undersubscribed at the close of the issue on Friday the 5th of March and has been extended by five working days to now close on Monday the 16th of March. The merchant bankers have taken a risk choosing this day as closing, as shares of SBI Card would be listing on the same day. As one hears in the media, if that listing does not go off well, there could be a backlash on this smaller issue which is for just about Rs 200 cr.

The week ahead has a trading holiday on Tuesday and effectively the week would begin on Wednesday. While Dow Jones was down on Friday, it appears that global markets on opening on Monday are likely to show some positive moves as governments look to contain the spread of the COVID-19. The strategy for the week would be to look for deep value in stocks and do selective buying. There has been deep erosion and markets are looking that much cheaper and attractive. Recoveries are unlikely to be 'U' shaped but they would move up in the immediate short term.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)

Source: IANS