The week ahead would be driven by what RBI Governor does on Tuesday. The street has already taken in its stride a 25 basis cut in rates as being par. Anything over and above this would be a bonus and anything less than that a disaster. The markets which are struggling, and just about recovering globally as well after US Federal reserve decided to keep rates unchanged would crack. The crack if it does happen would open the floodgates of selling.
On the positive side the RBI Governor has played his cards well and apprised the nation through captains of industry the risks of reducing cost of capital. So much so the Arun Jaitley and Jayant Sinha have stopped asking for a rate cut and instead have left the timing of the same on the governor.
The week gone by had four trading sessions which were on the whole a tame affair with negative bias. September series expired with a 1% loss significantly lower than the 5% loss in August series. Markets are expectant and quite certain of a rate cut on Tuesday. God forbid if it does not happen, markets will go for a toss.
Once again the primary market is getting ready to launch a number of issues after a fortnight. What would be the valuation and how aggressively the same would be done is a moot question. One yardstick that could be safely applied is that if a hype is created about the issue, more often than not it would be aggressively valued and be expensive. Second wherever the issue includes an offer for sale from a private equity investor invariably valuations would go for a toss. The private equity guy looks at the transaction as a quit India move and wants to dump his holding in that company and run. This forces him to price the companies’ shares aggressively.
It would be interesting to see who wins this war and battle. Investors are learning from their mistakes and merchant bankers are playing on the assumption that public memory is short. One issue where everyone makes money and to hell with valuations. An interesting scenario unfolds going forward where we will have a number of large issues tapping the markets.
In conclusion all eyes on mint street for Tuesday. More on that on Wednesday.
