Markets did virtually nothing on a net basis closing virtually flat. The BSESENSEX lost 18.01 points or 0.07% while NIFTY lost 5.15 points or 0.06%. The action continued in the midcap and smallcap space and the BSESMALLCAP gained 0.77%. The markets are waiting for the monsoon session to begin next Monday when it is expected that the GST bill will be finally debated and turned into law. It is this which is the biggest factor for the markets and the bulls seem to be pressing the accelerator.
The monsoon has advanced into most parts of the country and seems to have almost made up the deficit on account of the delayed onset. The prospects of rain god smiling on the country after two years of near drought is auguring well for the economy particularly rural India. Stocks of consumption companies have already seen an uptrend in the last few weeks and as further confirmation of the monsoon and ground reality comes in these stocks should perform better.
The primary market sees the issue from L&T Infotech open for subscription today and close on Wednesday. The company through an offer for sale of 1.75 cr shares in a price band of Rs 705-710 would be raising Rs 1233-1242 crs for its holding/parent company. LT Infotech earns operating margins of between 21.6-22% and has been finding growth tough in the recent years with crude prices have fallen significantly. Its oil and gas portfolio has fallen sharply and thus impacted overall growth. The issue is priced at a fully diluted consolidated basis based on March 2016 results at 12.6 times. The share is reasonably priced but the growth factor is the concern.
Considering the above the issue merits subscription on two counts. The allotment would be better than see in the recent issues where even retail portion was subscribed 4 times in MGL and 27 times in Quess Corp. Here on an optimistic assessment it should not exceed 2.4 times. The grey market premium of around Rs 70 ensures 10% listing gains. Investors should look at subscription for listing gains and then wait for the growth to return.
Shares of Quess Corp woul;d list on Tuesday the 12 th of July and it would be interesting to see what is the fate of HNI’s who had subscribed their portion 392 times. Whether they recover their funding cost or in their zeal to do the share encounters selling pressure? Secondly you would need strong buyers to want to buy at a premium of 60-65% to the issue price of Rs 317.
The primary market is active and without any fanfare the secondary market has become active too. After sharp gains in 2 weeks it remained flat last week and could show some sharp gains this week again.
