Markets looking for final burst before year end

By Arun Kejriwal

The week gone by saw markets correcting themselves after having made lifetime highs on both intraday and closing basis. While a correction after a huge rally is always welcome.

This brings us close to the level where the rally must commence again in the next couple of days. If that does not happen, there could be another sharp round of selling which would emerge. This could probably put an end to the expected Santa Claus rally that one is used to seeing in Indian markets.

BSESENSEX lost 686.83 points or 1.09 per cent to close at 62,181.67 points while NIFTY lost 199.50 points or 1.07 per cent to close at 18,496.60 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.95 per cent, 0.96 per cent and 0.96 per cent respectively.

BSEMIDCAP was a big loser and was down 4.32 per cent while BSESMALLCAP lost 1.18 per cent. Our markets lost on four of the five trading sessions and gained on one. The IT pack lost substantial ground on Friday and brought down markets.

The Rupee was under pressure and lost 95 paisa or 1.17 per cent to close at 82.27 to the US Dollar. Dow Jones too was under pressure and lost on three of the five trading sessions, gaining on just two. It lost 953.42 points or 2.77 per cent to close at 33,476.46 points.

RBI announced its credit policy after the three-day meet which was held between December 5 and December 7. RBI has raised repo rates by 35 basis points to 6.25 per cent. This comes after three consecutive rate hikes of 50 basis points each. This has come on the back of inflation easing but at the same time growth tapering. RBI has revised downwards GDP for FY23 to 6.8 per cent.

In primary market news, we had one listing and have three IPOs opening and closing next week. Shares of Dharmaj Crop Guard Limited which had issued shares at Rs 237, listed on Thursday. The discovered price was Rs 266, and shares after touching an intraday high of Rs 278.90 closed at Rs 266.40. They gained Rs 29.40 or 12.40 per cent. On Friday they lost ground and closed at Rs 249.85, a gain of Rs 12.85 or 5.42 per cent.

Shares of Uniparts India Limited would list on Monday (December 12). The issue was entirely an Offer for sale. The price band was Rs 548-577.

The first issue is from Sula Vineyards Limited which is tapping the capital markets with its offer for sale of 2,69,00,530 equity shares in a price band of Rs 340-357. The issue will open on Monday (December 12) and close on Wednesday (December 14). The fundraise at the top end of the price band would be Rs 960 crore. The selling shareholders include the Promoters and PE Investors.

Sula is in the business of producing wine and is India's largest wine producer and seller. The company has a dominant market share and is slightly higher than half by value in the 100 per cent grape wine market.

The company has its wine making facilities in the states of Maharashtra at Nasik and in Karnataka. There is a subsidy which was given on the export of grapes towards transportation which has been withdrawn recently.

Similarly, the refund of state taxes which was available for wine in the state of Maharashtra has been put on hold and would act as a big dampener on the performance of Sula if not reinstated.

The company reported revenues of Rs 453.91 crore for the year ended March 22. Revenues in the six months ended September 21 were at Rs 159.15 crore which have risen to Rs 224 crore in the current six months ended September 22. Net profit for the full year was at Rs 69.53 crore. For the current six months they were at Rs 41.25 crore against Rs 5.62 crore.

The EPS for the year ended March 22 was at Rs 6.53. The PE band at this price is 52.07-54.67 times. The company has chosen to compare itself with breweries and liquor manufacturers like United Spirits, Radico Khaitan and United Breweries. These companies are strictly not comparable as they are in allied business but certainly not identical business.

The share has more than its fair share of issues going forward. Readers would be well advised to subscribe for listing gains.

The second issue is from Abans Holdings Limited which is tapping the markets with its fresh issue for 38 lakh shares and an offer for sale of 90 lakh shares. The price band of the issue is Rs 256-270 and the issue opens on Monday (December 12) and closes on Thursday (December 15). The allocation is 10 per cent for QIBs, 30 per cent for HNIs and 60 per cent for Retail investors.

The company is a holding company and operates in the diversified financial space through 17 subsidiaries and step-down subsidiaries.

It reported an EPS of Rs 13.37 for the year ended March 22. The PE band is 19.15-20.19. The company has compared itself with three broking outfits namely: Edelweiss, Geojit and Choice. These companies are not strictly comparable as their broking activities are substantially larger. The business is complex and the proposed listed entity would have to demonstrate its core strengths before the company could be invested into.

The third and final issue is from premium and luxury car retailer, Landmark Cars Limited. The company is tapping the capital markets with a fresh issue of Rs 150 crore and an offer for sale of Rs 402 crore. The issue opens on Tuesday (December 13) and closes on Thursday (December 15). The price band of the issue is Rs 481-506.

The company sells cars from Mercedes, Honda, Volkswagen, Jeep, EV maker BYD, Renault and Commercial vehicles of Ashok Leyland. It is present in eight states through 112 outlets for sales and service. The company sold 19,264 new vehicles in FY22 against 13,282 in FY21 and serviced 2.79 lakh vehicles against 2.21 lakh vehicles in the same period.

The company reported revenues of Rs 2,976 crore against Rs 1,956 crore. The PAT was Rs 66.18 crore against 11.14 crore. The EPS on a diluted basis was Rs 17.45. The PE band was 27.56-29.

Looking at the press reports which said that automobile sales in November 22 were at record highs, and registered a growth of over 25 per cent over the previous year, this business has everything going for it.

Readers would be advised to look at the company for the medium term and long term as India rises to become a five trillion economy.

Coming to the market in the week ahead, expect them to remain volatile. One does not have too much news flow expected as we move towards the last fortnight of the calendar year. There is not much expected from overseas as well, other than the FED meeting on December 12-13. This could give some sharp volatility to US markets and hence to the world.

Expect markets to react to this news and decide whether they are likely to move to form new highs or turn sideways to negative.

The strategy for the week would be to play to the market moves and keep a close eye to volumes. Any sharp moves without volumes cannot happen at this juncture. Markets have to display volume and movement in the same direction. They would continue to be led by midcap and smallcap space. Trade cautiously.

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

Source: IANS