Friday the 16th of June was a red-letter day for the markets in India as they made new lifetime closing highs on both the BSESENSEX and NIFTY. While the closing highs have been made, we still need about 200 points on BSESENSEX and 60 points on NIFTY to beat the intraday highs. This is a small number and could happen on just the next positive day that markets witness. Normally these happen within a day or two of the closing highs whether before or after. BSESENSEX gained 758.95 points or 1.21% to close at 63,384.58 points while NIFTY gained 262.60 points or 1.41% to close at 18,826.00 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.65%, 1.78% and 1.88% respectively. BSEMIDCAP gained 2.95% and closed at 28,331.32 points. Similarly, BSESMALLCAP gained 2.87% and closed at 32,293.19 points. The two MIDCAP and Smallcap sectors have been outperformers and have gained 21.1% and 23.5% from the lows made in March 2023. Against this the rise in BSESENSEX has been 11% and 11.87% in NIFTY respectively. Our markets gained on four of the five trading sessions and lost on one.

The Indian Rupee gained 53 paisa or 0.64% to close at Rs 81.93 to the US Dollar. The US FED in its policy meeting decided to keep interest rates unchanged in a band of 5-5.25%. Dow Jones during the week gained on three of the five sessions and was up 422.34 points or 1.25% to close at 34,299.12 points. 

In primary market news, shares of Ikio Lighting Limited listed on the bourses on Friday the 16th of June. The company had tapped the capital markets with its fresh issue for Rs 350 crs and an offer for sale of 90 lac shares in a price band of Rs 270-285. Shares listed at Rs 391 on BSE and Rs 392.50 on NSE. They closed day one at Rs 403.75, a gain of Rs 118.75 or 41.67% on BSE and at Rs 403.85, a gain of Rs 118.85 or 41.70% on NSE. 

The week ahead sees one IPO tap the capital markets. HMA Agro Industries Limited is tapping the capital markets with its fresh issue of Rs 150 crs and an offer for sale of Rs 330 crs in a price band of Rs 555-585. The issue opens on Tuesday the 20th of June and closes on Friday the 23rd of June. The issue would raise Rs 480 crs. HMA Agro Processors is one of India’s largest buffalo meat processors and exporter. The company has also started exporting basmati rice and frozen fish. The company has six plants spread across the Northern and Western part of India with the Haryana plant recently set up being the largest capacity and most modern processing plant anywhere in South East Asia. The plant has a capacity of 570 tons per day. 

The entire product of the company is exported to over 40 countries globally. It markets its products under its own brand name. The company HMA Agro exports over 10% of India’s buffalo meat exports and is currently one of the top three largest exporters doing so. The company enjoys a decent reputation amongst its customers and being a food item is highly regulated by both the exporting country and the importing country. 

The idea of entering rice and fisheries is to extend the food basket and also as the buyer is the same. The company sells to wholesalers and is a B-to-B player. Further India’s exports of Rice and Buffalo meat form the top and the second topmost item of export in the Agri basket. 

The company reported revenues of Rs 3,083 crs for the year ended March 2022 and a net profit of Rs 117.62 crs for the same year. The EPS for the 12 months is Rs 24.39. For the nine months ended December 2022, the company reported revenues of Rs 2,370 crs and a profit after tax of Rs 113.24 crs. The EPS on a non-annualised basis is Rs 22.96. 

The Haryana plant which would effectively double the capacity of the company has started commercial operations since January 23 and the current year 23-24 would be the first full operation of the company. The PE band of the issue based on the 12 months March 22 number is 22.76-23.99. If one were to annualise the 9 months earnings for the period ended December 22, the EPS would be Rs 30.6. The resultant PE band would be 18.13 – 19.1. 

There are two upsides that an investor putting his money in HMA Agro Industries is betting on. The first is the growth in the business with the company doubling its capacity from 2 lac tons to 4 lac tons. The biggest is the price differential between the price at which India exports its meat to the world and the international price of wheat earned by countries like Brazil and Australia. The difference is huge with India setting the floor at 2.85 $ per kg and Brazil at 4.45 $ per kg. The USA is at a much higher 7.06$. If the gap is narrowed it will increase the profitability significantly. 

The company offers an investment into the meat segment which is a 100% export item and highly regulated by the animal husbandry department. It offers decent returns for investors. 

The FPO from Adani Enterprises and the fallout of the Hindenburg report are now over four months old. A lot of water has flown under the bridge and prices have moved. Adani Enterprises had fallen from Rs 3,500 to Rs 1,017 and are now around Rs 2,500. Significant opportunity for smart investors to make money. One thing to remember is that 3/4th of Adani’s businesses have sectoral regulators. 

In an interesting milestone, MRF has become the first company in India to have its share price touch the one lac mark. Its share price touched the 1 lac mark for the first time on Tuesday the 13th of June and closed at Rs 99,980.35 on Friday on the BSE. The market cap of the company is Rs 42,403 crs. 

Markets have made their lifetime closing highs and would also do so on an intraday basis shortly. What next? There is a 3% spill over which naturally and normally does happen. This would mean about 2,000 points on the BSESENSEX and 600 points on NIFTY. Markets would tend to be volatile with sharp intraday moves in both directions. The midcap and Smallcap space which have been outperformers would continue to rule the roost. The strategy for the week ahead would be to play in the midcap and Smallcap space and watch out for any signs of reversal. Even corrections at such stages in the market are swift. There would also be a retest of market highs once there is a reversal at the top. In short, elevated levels and unchartered territory is the reason for wild movement. 

Trade cautiously.

Markets in the week gone by made a valiant attempt to make new lifetime highs but failed. The top five-six heavyweight stocks in the benchmark indices need to fire on all cylinders at the same time for something like that to happen. That is the missing piece. However, the midcap and Smallcap indices are firing away and continue to make new highs. Markets saw the benchmark indices rise on two of the five trading sessions. They lost on two, and the fifth was a flattish day. At the end of it, BSESENSEX inched up 78.52 points or 0.13% to close at 62,625.63 points while NIFTY gained 29.30 points or 0.16% to close at 18,563.40 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.17%, 0.29% and 0.40% respectively. BSEMIDCAP gained 0.82% while BSESMALLCAP was up 1.64%. 

The Indian Rupee lost 16 paisa or 0.19% to close at Rs 82.46 to the US Dollar. The US FED meets between the 13th and 14th June for its policy review meet where there could be a small interest rate hike before a pause begins. This would be because the last job data showed that unemployment rose in the country. How the Dow reacts to the FED statement would influence world markets. Dow Jones gained on the last four sessions continuously and lost on one session. Dow Jones gained 114.02 points or 0.34% to close at 33,876.78 points. 

RBI in its bimonthly policy meeting kept interest rates unchanged. Repo rate remains at 6.5%. RBI has conveyed its intention to tackle inflation and make best efforts to bring the same down. The differential between the Repo rate in India and the US Fed rate would probably be the lowest ever in over 25-35 years that I have understood such interest rates and what they mean. The rupee needs to show strength and start appreciating slowly so that the forward cover comes down as we go forward. This would be a big help.

The IPO from Ikio Lighting which was open between Tuesday the 6th of June and Thursday the 8th of June fared very well and beat all expectations. The issue which comprised a fresh issue of Rs 350 crs and an offer for sale of 90 lac shares was oversubscribed 67.75 times overall. The QIB portion was subscribed 163.06 times, HNI portion was subscribed 65.38 times and Retail portion was subscribed 14.30 times. There were 16.33 lac applications received. The price band was Rs 270-285. 

The benchmark indices had made their lifetime highs on 1st December 22 and we are trying to make new highs once again but failed to do so. At the same time action which is concentrated in the midcap and Smallcap space has moved these indices to new levels altogether. BSEMIDCAP on the 1st of December made a high of 26,146 points and then saw a high of 26,440 points on 15th of December. It hit a low of 23,356 points on the 28th of March and since then has been moving in an uptrend virtually non-stop. The high made last week was 27847 points. The difference between the 1st of December 22 and today is 1,700 points or 6.5%. 

BSESMALLCAP has had a similar movement as well with the 1st December level being 29,816 points, and then saw a high of 30,092 points on 15th December. The 28th March low was 26,120 and the high during the week was 31,391 points. The difference being 1,576 points or 5.28%. This is a segment where FPIs are active in a handful of stocks only and even domestic mutual funds are selective. Public participation is large and markets are doing well. 

Coming to the markets in the week ahead, the outcome of the FED meeting would play an important role. There is expectation of a rate hike this time around. Markets would continue to strive to make new highs and as mentioned earlier the attempt can only be successful if the heavyweights fire. Two of them are getting ready. The first being Reliance with the impending corporate announcement of the demerger of the financial services record date. The second would be the timeline of the HDFC Twins merger record date. Both these companies have the potential to provide the boost that the markets are looking for. 

The strategy for the week would be to look for action in the midcap and Smallcap space.  Sharp movement looks unlikely and besides the FED meeting, corporate announcement as mentioned above, the only trigger could be the break of monsoon in large parts of the country. Trade cautiously.