Besides being volatile the markets did nothing last week and just about managed to close flat. The BSESENSEX lostv9.84 points or 0.04% to close at 26,625.91 points while NIFTY gained 0.15 points to close at 8,170.20 points.
In news last week, the Fed on expected lines did nothing and kept rates unchanged but what was disturbing was the commentary post the meeting which showed that the economy is not doing too well. This week globally ‘BREXIT’ on Thursday would keep markets and currencies on tenterhooks till the referendum is over.
In India our RR the RBI governor over the weekend informed his staff that he would return to academia once his term expires on the 4th of September. Keeping the high office in mind his step would be in fitness of things where he chose not to speculate on his extension. There would be pro’s and con’s to what he has done but let us leave the man to think himself. It must be noted that no man is bigger than the chair he occupies. Such a high official not seeking an extension will have its reverberations on the equities, currencies and bond markets. However they would be knee jerk in reaction and one must note that the government would not like a wrong signal to emanate from his departure. Therefore expect markets to open gap down but recover ground on this news. If global markets are down that would be a separate story. I believe today would be a good trading day.
Markets are currently in a state of flux and nothing much seems to be happening. There is however some activity in the primary market where the offer for sale from Mahanagar Gas Limited (MGL) is opening on Tuesday the 21st of June and closing on Thursday the 23rd of June. The offer is for 246.94 lac shares in a price band of Rs 380-421. The company supplies CNG and PNG in Mumbai and its surrounding areas and has added the district of Raigarh to its area. The price earnings ratio is 12.10-13.40 based on the earnings of Rs 31.4 for the year ended March 2016. This is at a substantial discount to the PE ratio of its comparable Indraprastha Gas which does a similar activity in the NCR region and quotes at a price of Rs 617.40. The PE for the year ended March 2016 is 20.76.
The only concern about MGL is the fact that Mumbai being an island has its limitations to growth and that would be addressed when over the next 18-24 months the infrastructure in Raigarh is laid out. The discount however is more than adequate and it makes sense to apply for the minimum lot in retail category as the issue would be oversubscribed.
The monsoon has yet to break over Mumbai and it currently it is hot, humid and sweltering. The monsoon should hit the city anytime soon now and probably the markets too are waiting for the monsoon. Till then remain on the sidelines.
