Markets to see volatile movements on account of midweek holiday

By Arun Kejriwal

Markets had a decent outing in the week gone by and they gained on three of the five trading days. The remaining two trading days were flat with virtually insignificant movement. BSESENSEX gained 753.87 points or 1.44 per cent to close at 53,140.06 points while NIFTY gained 233.60 points or 1.49 per cent to close at 15,923.40 points.

 

The broader indices like the BSE100, BSE200 and BSE500 saw gains of 1.35 per cent, 1.41 per cent and 1.51 per cent respectively. BSEMIDCAP gained 1.39 per cent while BSESMALLCAP was up 2.27 per cent. The benchmark indices made new lifetime intraday highs of 53,290.81 points and 15,962.25 points on Friday while closing highs were made on Thursday at 53,158.85 points and 15,962.25 points respectively. Clearly market momentum has picked up while the only thing missing is euphoria in the secondary market.

The Indian Rupee gained 18 paise or 0.24 per cent to close at Rs 74.56 to the US Dollar. Dow Jones had a poor show on Friday when it lost about 300 points and hence ended down for the week with a loss of 182.31 points or 0.52 per cent to close at 34,687.85 points.

In primary market news, the IPO from Zomato Limited for Rs 9,000 crore fresh issue and offer for sale of Rs 375 crore received excellent and euphoric support. The total amount garnered was Rs 2.14 lakh crore, including the anchor portion of about Rs 4,196 crore. The QIB portion was subscribed 54.71 times, HNI portion was subscribed 34.80 times, Retail portion was subscribed 7.87 times and Employee portion remained undersubscribed at 0.62 times. The anchor portion saw 100 anchor investors comprising 186 entities. What is strange in the anchor allocation is an allotment of 2.90 lakh shares allotted to ICICI Prudential Dividend Yield Fund. Is it not strange that a company which has accumulated losses, has never made profits since inception and not sure how many more years before it makes profit, sees investment by a dividend yield fund? Another way of looking at it is with 186 entities roped in, is anybody left out.

There were unconfirmed reports about the anchor portion being subscribed or receiving bids of 35-37 times the anchor size. While the official number would be publicly available on the day of allotment, what does this effectively mean? The oversubscription would have garnered a response of 1.47-1.55 lakh crore. The total response from the QIB book was 1.53 lakh crore. The math just does not add up. Does it mean that only those people who had applied for anchor allotment have applied?

There is an issue from Tatva Chintan Pharma Chem Limited which is tapping the capital markets with its fresh issue for Rs 225 crore and an offer for sale of Rs 275 crore in a price band is Rs 1,073-1,083. The issue opened on Friday the 16th of July and closes on Tuesday the 20th of July. The company is a niche speciality chemical company manufacturing SDA (structure directing agents), PTC (Phase transfer catalysts), PASC (pharmaceuticals and agrochemicals intermediates) and Electrolyte salts for SCB. The company is the largest manufacturer in its category in the country and one of the leading players in the world as well. The revenues of the company were Rs 300.36 crore for the year ended March 2021 and Net Profit after tax was Rs 52.40 crore. The company enjoys healthy margins of 23 per cent at the EBITDA level and 17 per cent at the PAT level. The company reported an EPS of Rs 26.02 for the year ended March 2021. The PE band is 41.24-41.62 times based on March 2021 numbers. The issue which opened on Friday has been subscribed 4.55 times on day one with the Retail portion being subscribed 8.32 times. There is money on the table for those investors who are lucky to get an allotment.

The primary issues from G R Infraprojects Limited and Clean Science Technology Limited would both be listing their shares on Monday the 19th of July. These issues were entirely offered for sale and had received excellent response.

After the runaway success of Zomato Limited in the primary market, Paytm has filed its DRHP for a Rs 16,600 crore IPO which consists of an equal size of fresh issue and offer for sale.

On the Covid-19 front, the world saw 19,07,97,676 patients, 40,99,170 deaths and 17,38,50,834 patients who had recovered. In India we saw 3,11,06,066 patients, 4,13,640 deaths and 3,02,69,796 patients who had recovered. In the previous week, the world saw 35,18,338 new patients, 56,150 deaths and 25,96,471 patients who had recovered. In India, we saw 2,68,844 new patients, 5,568 deaths and 2,94,732 patients who had recovered. The number of people who have been vaccinated has crossed the 40 crore-mark.

The week ahead has a trading holiday midweek on Wednesday. This effectively means two trading periods of two days each. This would disrupt the momentum and make Tuesday a day when we could see positions being lightened ahead of the holiday. Similarly, Thursday could be a highly volatile day, where markets react to happenings of Tuesday evening in US and global markets on Wednesday. The previous week saw new highs being achieved and markets hitting the top end of the band as was envisaged. In normal circumstances, one would have expected a breakout to happen in the coming week but the same may get delayed because of the trading holiday.

It makes logical sense to play the ensuing volatility and continue booking profits on sharp rallies and buying into corrections as the previous week. Markets will see volatility and different pack of stocks moving each day and making new highs. If I had to stick my neck out and hazard a guess, the week beginning 26th July and also having July futures expiry would be the frenzy week in the markets. The best that could happen this week is that the early signs of impending movement are visible when trading ends on Friday the 23rd of July. Trade cautiously.

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

Source: IANS