Markets seem to have peaked out last week after the listing of the mega issue from ICICI Prudential Life Insurance Company Limited. In the last ten years there have been three instances and if one counts the case of ICICI Pru, it would be the fourth case. In 2006 it was Reliance Petroleum, in 2008 Reliance Power and in 2010 it was Coal India. Each of these issues were very large offerings and many times the largest offering before it. For example the ICICI Pru issue was for a little over 6,000 crs and the issues before it were not greater than Rs 1,500 crs. L&T Infotech was in the region of Rs 1250 crs, while RBL Bank was a shade over Rs 1,200 crs. This means that the ICICI Pru issue was over four times bigger.
Markets began the week on a bearish note and by the end of Wednesday the BSESENSEX had already lost 376 points. What happened on Thursday actually confirmed the weakness and the week ended with losses of 802.26 points or 2.80% on the BSESENSEX. On the NIFTY the weekly loss was 220.40 points or 2.50%. We are at crucial levels of support and are at levels last seen in the first fortnight of July. The results season would begin from the following week and marketmen would be looking for green shoots and trend changers very minutely.
Last week September series futures expired and they were absolutely flat with the net change under a point at 0.95 points negative. They had begun the week with gains of 240 points which were lost in 4 days of trading which ended with the press conference about the surgical strikes across the LoC.
Last week saw two listings with the first being GNA Axles Limited. The fresh issue for 63 lac shares was in a price band of Rs 205-207 and raised Rs 130 crs. The issue was subscribed 55 times. The share is trading in trade to trade segment and would continue to do so till the end of the week beginning from today. The share had a great debut and ended the week with gains of just over 10%.
The second issue was the mega IPO from ICICI Pru. The offer for sale was a shade over Rs 6,000 crs and was oversubscribed 10.48 times. The price band was Rs 300-334 and shares were allotted at Rs 334. The share listed at Rs 329/330 and made a high of Rs 333.90 and fell thereafter. The share had a disastrous debut and closed with losses of Rs 36.35/36.45 or 10.88%/10.91%. A poor start for a fundamentally strong company even though many in the market place felt that valuations were expensive. The stock recovered some ground on Friday and closed with weekly losses of 7.16%.
This week we have the issue from Endurance Technologies Limited which opens on Wednesday and closes on Friday. The offer for sale is for Rs 1,161 crs at the top end of the price band of Rs 467-472. The company may be broadly termed as an auto ancillary having presence spread across 25 plants in India and Europe. It had revenues of Rs 5,274 crs on a consolidated basis with net margins of 5.5%. The company is into four broad segments of aluminium casting and machining, suspension, transmission and braking systems. It supplies to the 2 wheeler, 3 wheeler and 4 wheeler segments in India and 4 wheeler passenger and commercial vehicle segment in Europe. Roughly 70% of the revenues come from India and 30% from exports.
The 2 wheeler /3 wheeler segment saw about 18 million vehicles produced in the last financial year and the Asean region has 13 million which is the opportunity for the company going forward. This is besides the growth which is expected in India at around 8 to 10%. Shares of the company aree being offered at an historical valuation of 22.80 times price earnings ratio at the top end of the price band of Rs 472 based on consolidated numbers of March 2016. As this is an offer for sale there will be no dilution. The offer looks attractive considering the growth in the sector and opportunity.
The government has received excellent response to its voluntary income declaration scheme and over Rs 65,000 has been declared. 45% of this amount would flow to the coffers as tax and penalties. Bidding for spectrum has begun and after five rounds the total amount bid is about Rs 55,000 crs. Bids are a bit muted but things are likely to pick up today.
Markets have turned weak and are now in a correction mode. There will be rallies and the market would go down in a zigzag manner. Take money of the table in every rise and wait for better times to invest. The long term story is fully intact. It is only the short term and medium term where the seven month rally post budget has come to an end.