It was a volatile week at the markets where investors and traders were caught napping. Once again markets demonstrated that they have a mind of their own. Markets gained on three of the five trading sessions and lost on two. BSESENSEX lost 428.87 points or 0.56% to close at 76,190.46 points while NIFTY lost 111.00 points or 0.48% to close at 23,092.20 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.01%, 1.29% and 1.64% respectively. BSEMIDCAP was down 2.39% while BSESMALLCAP was down 4.21%. The benchmark indices made new lows with BSESENSEX at 75,641.87 points and NIFTY at 22,976.85 points. With each successive new low, markets are becoming that much more vulnerable and unless they bounce we could see a sharp sell-off sooner or later.
The Indian Rupee recovered, gaining 41 paisa or 0.47% to close at Rs 86.20 to the US Dollar. Dow Jones gained on three of the four trading sessions and lost on just one. Dow was up 936.42 points or 2.15% to close at 44,424.25 points.
There was one IPO which listed on the main board on Thursday the 23rd of January. The issue from Stallion India Fluorochemicals Limited had issued shares at Rs 90. The share debuted at Rs 120 and closed day one at Rs 125.99. On Friday, the share was under pressure and lost ground, closing at Rs 119.70, a gain of Rs 29.70 or 33%.
There is one issue opening in the week ahead. The issue from Dr Agarwal’s Healthcare Limited is opening on Wednesday the 29th of January and closing on Friday the 31st of January. The issue consists of a fresh issue of Rs 300 crores and an offer for sale of 6,78,42,284 shares in a price band of Rs 382-402. The issue would raise a total sum of Rs 3,027.26 crores at the top end of the price band.
The company as the name suggests is a super specialty in eye care and offers state of the art facilities in India and Africa. It has 28 hubs and 265 spokes with a revenue break up of 45.42% and 54.35% between hub and spoke. The hospital chain has 193 facilities in India of which 120 are in the states of Tamil Nade, Maharashtra and Karnataka. The company has 15 facilities in Africa. Of the total facilities, more than half are emerging at 113 while 95 are mature. They are defined as less than three years as emerging and mature as more than three years.
In terms of performance, the company reported revenues of Rs 1,332.15 crores for the year ended March 24. The restated profit after tax was Rs 95.05 crores. The EPS on a fully diluted basis was Rs 3.13. The PE band is a steep 122.04-128.43 times. Expensive by all standards, but the selling point is the mix of emerging and mature outlets/facilities that the company has. Secondly eye care is something that is imminent with age. The target opportunity is the population. In terms of comparison while there are no listed peers, all the hospital chains are comparable. The biggest difference is the fact that hospitals have beds while eye care is all OPD (out patient department). This reduces capex cost and leads to a significant higher patient throughput. Equipment is the biggest asset in this business.
Primary markets have been buoyant only because secondary markets have been weak over the last couple of months. This is borne out by the fact that a large number of IPOs listed over the last couple of months are trading at their lows and many of them below their issue price as well. Euphoria and hence over subscription sell the issue and as and when reality sinks in the cookie crumbles. One example of high volatility is in Waaree Energies which had issued shares at Rs 1,503. It touched a high of Rs 3,740 and on Friday made a low of Rs 2,207 before closing at Rs 2,240.
Markets are seeing continuous selling by FPIs and in the month of January they have sold on every single day but one. Domestic institutions and our very own individual investors have been buying and absorbing the sales being made. The fact remains that markets are falling and there is no respite visible on the horizon. In the US, Trump has begun making announcements but has not yet come to the trade issues as yet. What he would do, is anybody’s guess.
Closer home, the Union Budget would be presented on Saturday the 1st of February which is a mere five trading sessions away. Not too many clues what the budget would hold as yet. However, the buzz all over is that there could be some changes in personal income tax which would ensure that there is more disposable income in the hands of the people who form the bulk of the tax paying population of this country. If this happens this could lead to consumption led demand going up and that would help in the economy which seems to be stalling. Any other goodies if announced could be treated as bonuses.
January futures would expire on Thursday the 30th of January. The current level of NIFTY at 23,092 points is lower by 658 points or 2.77%. the present mood makes it easy for the bears to take this series. The good part would be that positions would get significantly reduced before virtually budget eve. This would bring sharp volatility if there is any unexpected announcements in the budget.
Key levels for the markets on the downside are at the lows made on Tuesday in the week gone by at 75,640 and 22,976 points on BSESENSEX and NIFTY respectively. If these break, we would have a sharp downtick which could take us down another 500-600 points on BSESENSEX and 200 points on NIFTY. On the upside resistance is around the 23,450-500 points on NIFTY and at 76,700-850 points. The strategy for the week would be to look for opportunities in the large cap space. Pain in midcap and small cap is still happening and there could be acceleration as we come to the last of the pain points which could get extended.
Trade cautiously.
