Time to take profit off the table or keep trailing stop loss

B0Y ARUN KEJRIWAL

The week gone by saw markets on a roll and score handsome gains on every day of the week. BSESENSEX gained 1,812.44 points or 4.68% to close at 40,509.49 points. NIFTY gained 497.25 points or 4.36% to close at 11,914.20 points. The broader indices saw BSE100, BSE200 and BSE500 gain 3.73%, 3.35% and 3.06% respectively. BSEMIDCAP lost 0.32% while BSESMALLCAP lost 0.03%. While the benchmark indices have recovered and are now trading at 7-month high, they are yet to cross the highest levels recorded during the year.

The Indian Rupee was flat and gained one paisa or 0.01% to close at Rs 73.13 to the US Dollar. Dow Jones had a stellar week and gained 904.09 points or 3.27% to close at 28,586.90 points. With these gains Dow is in positive territory for the year 2020 and is higher than the year end level of 28,538.44 points.

The week was eventful with TCS announcing its results and a buyback of Rs 16,000 crs at a premium to the market price. The stock which was at Rs 2,737.40 rallied to close at Rs 2,814.95 for the week. It had opened the week with strong gains and clocked weekly gains of Rs 292.20 or 11.58%. Wipro has also announced a buyback and the board would be meeting on 12/13 October. The share rallied strongly to close at Rs 374.10, a gain of Rs 61.10 or 19.52%. Incidentally the two-buyback announcements and decent results from TCS, saw the sector register strong gains with BSEIT up 9.17% and BSETECK up 7.67%. They were ably supported by BSEBANKEX which gained 6.73%.

The primary offering of 51 lac fresh shares from Likhitha Infrastructure Limited which was extended due to poor response from QIB's was subscribed. The issue was extended to close on Wednesday the 7th of October instead of the original 1st of October. The QIB portion of 50% was reduced to 1% and the QIB portion difference was added to HNI portion. The issue was subscribed 9.51 times with QIB portion subscribed 21.99 times, HNI portion subscribed 1.54 times and Retail portion subscribed 23.71 times. This change in allocation from 50% to 1% during the issue was unprecedented and throws up a window of opportunities going ahead.

The mega reverse book building issue from Vedanta Limited met its expected end with the exercise failing at the very first hurdle. The company failed in garnering support of enough number of shares to take it to the threshold level of 90%. Against thelevel required of 134.10 cr shares, the company could garner support of just 125.47 cr shares. Though there were bids for over 11 cr shares which were pending to be confirmed over the last 24 hours or more, they failed to get confirmed clearly indicating that the idea was to get the issue past the first hurdle. The case needs to be investigated by the exchange as to who were the persons who had bid for over 11 cr shares and did not get them confirmed even after such a long time. The strictest action should be taken against them as the promoters and merchant bankers of Vedanta wanted the issue to be extended by at least one day.

The failure to get the required number of shares required, saved Anil Agarwal the embarrassment of having to acknowledge the fact that against his delisting offer of Rs 87.25, the book was built at Rs 320, which is approximately 3.66 times higher. Readers would recall that the promoter Anil Agarwal had made a delisting proposal at Rs 87.25 which was below the book value of the share way back in May 2020. This is when Covid-19 had broken out and crude prices fell sharply, but had then recovered. The promoter Anil Agarwal who has a track record of being unfair to minority shareholders, reduced the book value of his company by taking a notional impairment loss in the books which brought his book value to a similar oneto the delisting price.

Further it is alleged that at his behest a report was published by an institutional broker and one of the top four online retail brokers which stated that the reduced book value was certified by SEBI. Of course, the broker concerned had to issue a rejoinder and withdraw the same. Kudos to Life Insurance Corporation of India which made a public statement about their bid for 23.66 cr shares or 6.37% of the companies holding at Rs 320 which they felt was fair value. This emboldened the minority shareholders and also ensured that even if Anil Agarwal went past the first hurdle of getting bids for 134.1 cr shares, the book building price would be Rs 320. Of course, there would be an opportunity for giving a counter offer by Anil Agarwal. This price was beyond the capacity of Anil Agarwal to pay and hence failed. What next? Expect the company to distribute the dividend received from Hindustan Zinc and not distributed so far amounting to Rs 12 per share approximately for Vedanta shareholders. This is a big setback for Anil Agarwal as he has always 'managed' to get what he wants and make minority shareholders be at the receiving end.

The primary issue from Angel Broking Limited listed on the bourses and had a poor showing losing Rs 30.15 or 9.85% on debut day. During the course of the week, after losing further ground, the share recovered some of the additional losses and closed at Rs 274.70, down Rs 31.30 or 10.23%.

The week ahead sees shares of Mazagon Dock and UTI AMC list on Monday. While the former is expected to post gains on day one, the latter would be under pressure.

On the covid-19 front, the world saw 3,74,75,839 patients of whom 10,77,594 died and 2,81,17,060 people recovered. In India we saw 70,53,806 patients, 1,08,371 deaths and 60,77,976 people recovering. Compared to the previous week the world saw 23,36,140 new patients, 39,567 deaths and 19,88,650 people recovering. In India the number of new patients was 5,04,433 people with 6,559 deaths and 5,68,010 people recovering. For the third week in a row, the number of people recovering is higher than new patients.

Coming to the week ahead, the markets have turned super buoyant and there is always anxiety and nervousness at such heights. The same would continue and be the state of the market in the coming week. The present October series has seen gains of over1,100 points or 10.26%. This is a stupendous gain and we still have almost three weeks before expiry happens on Thursday the 29th of October. There is no doubt that these gains already registered are unsustainable and would be partly pared before expiry. The moot point is when, and whether we would gain further before the correction? I believe there is still some more to come before the correction but there would be wild swings. Even at the point of repeating an often quoted saying about the markets in Hindi would be apt at this time. "SAU SONAR KI, EK LOHAR KI", which means 100 strokes by the goldsmith are equal to one by the blacksmith.

Trade cautiously and enjoy the market moves but become cautious and exit at the first signs of danger.

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

Source: IANS