Year end and expiry to see markets more circumspect

The week gone by made us realise the vulnerability that affects our markets. Friday, from the previous week and continuing into Monday, the first day of the current week, rattled markets and virtually knocked them off their feet. The fact that they managed to recover all of these losses and manage to close with a small gain for the week speaks well of the markets but still underscores the fact that it has a soft belly and remains vulnerable. BSE SENSEX gained 112.57 points or 0.20 per cent to close at 57,124.31 points while NIFTY gained 18.55 points or 0.11 per cent to close at 17,003.75 points. The broader markets saw BSE100, BSE200 and BSE500 close on a mixed bag with BSE100 up 0.04 per cent while BSE200 and BSE500 lost 0.02 per cent and 0.04 per cent respectively. BSEMIDCAP was down 0.75 per cent while BSESMALLCAP lost 0.31 per cent.

Coming to the markets on Monday, they hit an intraday low where BSE SENSEX was down a massive 1,900 points and NIFTY 575 points. They recovered from there to close with losses of 1,200 points on BSE SENSEX and 370 on NIFTY. The next three days saw markets making massive gains and recover all the losses of the previous week and the opening day's losses as well. The intraday high made on Friday, the last day of the week saw BSE SENSEX touch 57,623 points and NIFTY 17,155 points. This shows the sharp movement and also the way traders and investors who carried positions home get caught on the wrong foot.

Dow Jones gained 585.12 points or 1.65 per cent to close at 35,950.56 points. Friday was a trading holiday and it would be interesting to see how markets fare after a long holiday. The India Rupee recovered lost ground and gained Rs 1.06 or 1.39 per cent to close at Rs 75.02 to the US Dollar.

The week gone by saw one new listing on every day of the week. It began with Shriram Properties Limited which had issued shares at Rs 118. The share closed day one at Rs 99.40, a loss of Rs 18.60 or 15.76 per cent. By the weekend, losses had widened with the share closing at Rs 83.40, down Rs 34.60 or 29.32 per cent.

The share to list on Tuesday was C.E. Info Systems Limited which had issued shares at Rs 1,033. The share ended day one at Rs 1,394.55, a gain of Rs 361.55 or 35 per cent. It gained further during the week and closed at Rs 1,432.45, a gain of Rs 399.45 or 38.67 per cent.

Wednesday saw the listing of Metro Brands Limited who had issued shares at Rs 500. The share closed day one at Rs 493.55, a loss of Rs 6.45 or 1.29 per cent. It lost further ground during the week to close at Rs 470.80, a loss of Rs 29.20 or 5.84 per cent.

Thursday saw shares of Medplus Health Services Limited list. The company had issued shares at Rs 796. The shares closed day one at Rs 1,120.85, a gain of Rs 323.85 or 40.81 per cent. On Friday there was some profit booking which saw the share give up some gains and end the week at Rs 1,075.25, a gain of Rs 378.25 or 35.08 per cent.

Friday saw shares of Data Patterns Limited list. The company has issued shares at Rs 585. The share closed trading at Rs 754.85, a gain of Rs 169.85 or 29.03 per cent.

These five listings have conveyed a strong message to the markets. Firstly, where investors felt that they were unhappy with the price they have not subscribed to the issue. Secondly, in a couple of issues, the subscription by the leveraged HNI was very high and the cost of funding could just not be sustained. These shares while doing well on listing, could not earn the interest or cost of funding and therefore turned into losses for the leveraged investors.

The performance of the last 17 IPOs which have listed from 15th November, show that 7 out of the 17 are currently trading at a discount. Of the five that listed during the last week, two are trading at a discount. Gone are the days when the year began when almost every issue opened with gains of 50 per cent or more.

There was one issue which opened and closed for subscription during the week. The issue was an offer for sale from CMS Info Systems Limited which had tapped the markets with its issue to raise Rs 1,100 crore in a price band of Rs 205-216. The QIB portion was subscribed 2.09 times, HNI portion was subscribed 1.52 times and Retail portion was subscribed 2.26 times. There were 5.08 lakh applications and on basis of lots, the Retail portion was subscribed 1.97 times.

Readers would recall that CMS had in its DRHP proposed to raise about Rs 2,000 crore. It has then reduced the size and the price and raised Rs 1,100 crore. Looking at the response to the issue, one wonders what would have happened if the company had stuck to its original size and issue price.

This sends strong signals to merchant bankers, promoters and more importantly to PE investors that there must be something left on the table for investors. SEBI Chief had in a zoom communication to the merchant banking community expressed his thoughts on pricing going out of proportion and assured that this would be looked into. What kind of guidelines come, one is certainly not sure at this time.

The week ahead sees December Futures expire on Thursday, December 30. The current value of NIFTY at 17,003.75 is lower by 532.50 points or 3.04 per cent compared to the level of the previous expiry. Considering the last week in particular, this is not significant, but it would be a tough one for bulls to cross this hurdle and gain the series. As things stand bears have the upper hand.

'Omicron' appears to have foxed the world currently. While it has not led to large number of deaths, the number of affected people has seen a spurt. Parts of Europe and the United States have seen cases go up sharply. Whether it is a seasonal effect with Christmas and New Year leading to people letting down their guard or the new variant at play is still not clear.

The Indian government has decided to introduce vaccination for children in the age group of 15-18. It has also decided to have a booster dose for frontline workers and senior citizens with co-morbidities.

Coming to the markets in the week ahead which is the last week for the current calendar year would see volatility continuing. It would be less than the previous week for sure. Having hit strong support at the previous week's low and resistances at the top on Friday, it would be a range bound movement with very remote possibility of a breakout or breakdown in either direction. Considering the fact that FIIs would be enjoying some sort of well-earned rest, expect action to shift to the broader markets. It would also be time for year end NAV exercise for many of the funds and this could lead to some unusual price movement in particular stocks. Investors could look to take advantage of such movements.

In conclusion, it would be a quieter week as compared to the last one but would still remain volatile. Use sharp rallies to sell and sharp dips to buy but continue to build cash.

Further as we come to the last article for the calendar year, wishing all readers 'Happy New Year 2022'.