The week ended 29th April 2022 was full of both sided sharp moves. The week began with an expected fall, rose the next day, fell the next day and kept on alternating between gains and losses all through the week. At the end of the week, it had lost on three of the five days. What was eventful was the fact that Friday was the day of reversal where markets gained initially and in the last hour just cracked. In the process the chart formation was that of an engulfing candle where both the previous days highs and lows were crossed and market closed lower. The week closed with small net change which does not convey the market movement. BSESENSEX lost 136.26 points or 0.24% to close at 57,060.89 points while NIFTY lost 69.40 points or 0.40% to close at 17,102.55 points. The broader markets saw BSE100, BSE200 and BSE500 lost 0.44%, 0.56% and 0.69% respectively. BSEMIDCAP lost 1.14% and BSESMALLCAP lost even more at 2.17%.

The India Rupee gained 6 paisa or 0.08% to close at Rs 76.42 to the US Dollar. Dow Jones had yet another Friday selloff when it lost 939 points. This is the second consecutive Friday when it has lost 900 points plus. The week ended with losses of 834.19 points or 2.47% to close at 32,977.21 points. Dow Jones had in the year to date lost 9.25% and is very close to the 10% level when the US gets worried about their markets. Nasdaq lost 4.17% for the week and is now down 21.16% on a year-to-date basis. It closed at 12,334.64 points and made a new low on Friday.

The US FED meets on the 3rd and 4th of May and would be raising interest rates. While a 50 basis points is a certainty, there is a growing feeling that the way inflation is shaping up, the hike could be even more.

The week ahead has a trading holiday on Tuesday and looking at the Dow on Friday, the opening of our markets would be gap down on Monday. With the Tuesday holiday and Fed meeting coming up, even lower prices would not attract investors or traders as they would be cautious. Expect markets to take a trend only post what the Fed does on Wednesday night.

April futures expired with the bears having it their way. The only saving grace was the fact that markets rallied on Thursday and allowed the bulls to recover some ground. The series ended with losses of 219.70 points or 1.26% to close at 17,245.05 points.
GST collections for April 2022 were at a new high of 1.68 lac crs. This is higher than the previous highest of Rs 1.42 lac crs. This sets the tone for recovery of the economy in FY22-23.

In primary market news, we had two issues which opened and closed for subscription during the week. These issues were the first under the new guidelines which restricted funding to just one crore per individual. There was also the bifurcation of the HNI bucket into two segments of 5% and 10% with the first being 2-10 lacs and the second 10 lacs and over.

The first thought that comes to mind post the subscription is the fact that HNI subscription has cooled of significantly. Subscription is a mere 22.25 times and just 3.73 times in the HNI category respectively. The days when subscription began at a three-digit level and went up to 400 and 500 times are certainly a thing of the past. This has also reduced the premiums significantly as there is no cost of funding. While everything seems fine for the moment, stock exchanges have chosen not to give the breakup of the two buckets of HNI subscription for reasons best known to them. Through this article I would request SEBI to direct the exchanges to disseminate the information as it is in the interest of investors.

The issue from Campus Activewear Limited which had tapped the markets with its offer for sale of 479.50 lac shares in a price band of Rs 278-292 was oversubscribed 51.75 times overall. The QIB portion was subscribed 152.04 times, HNI portion 22.25 times, Retail 7.68 times and Employee 2.11 times. In the 10 lac plus category roughly one out of three applicants would get shares worth Rs 2 lacs.
The second issue was from Rainbow Children’s Medicare Limited which had tapped the markets with its fresh issue of Rs 280 crs and an offer for sale of 2.4 cr shares in a price band of Rs 516-542. The issue was subscribed 12.42 times with QIB portion subscribed 38.90 times, HNI portion subscribed 3.73 times, Retail portion subscribed 1.38 times and Employee portion subscribed 0.31 times. HNI applicants in the 2lac plus category would get full allotment. I believe it would take a few issues for investors to understand where they should apply going forward.

The week ahead sees Life Insurance Corporation of India Limited tapping the markets with its offer for sale of 22.13 cr shares in a price band of Rs 902-949. The issue would have its anchor on Monday the 2nd of May and the issue would open on Wednesday the 4th of May and close on Monday the 9th of May. The issue is open for four days for subscription. This issue which would be the largest issue to ever hit the capital markets would raise about Rs 21,000 crs.

The issue has a reservation of 10% for Policy holders which is the first time ever that such a reservation is being made. They are also entitled to a discount of Rs 60 per share. The Employee quota is also for 10% and they along with Retail investors would get a discount of Rs 45 per share.

The issue which would have a market capitalisation of about Rs 5.92 lac crs is priced at 1.1 times its EV or embedded value. This is in line with large, mature international insurance companies from China which have the size and scale of LIC.

The government is selling 3.5% of the company and has given a commitment to investors that there would be no dilution of shares for a minimum of 12 months after listing. This one year holding period is enough to allow the share to establish its price and place in the capital markets.

Looking at the likely response, the opportunity that LIC has in the Indian markets, its growth over the last 22 years when privatisation took place and the fact that insurance is highly under-penetrated in India, offers great opportunity to investors looking at LIC. This is a must invest opportunity.

Coming to the markets in the four-day week ahead, they would be volatile and choppy. As mentioned early they would be under pressure on Monday when markets open. Going forward the key event would be the FED meeting for hiking interest rates which would be known to all on Wednesday night. Global markets would react to the same on Thursday morning. Looking at the trend and direction, markets are in a range bound movement where they tend to hit the lower and upper band every week. The band is 56,000-58,000 on the BSESENSEX and 16,800-17,400 on NIFTY. For markets to move in either direction they have to break out of these levels and then sustain the same. Currently we seem to be finding that tough.

However, this range bound movement is providing trading opportunities. How long this would last is debatable. I believe this is the week where markets will decide their trend one way or the other. Trade cautiously.

Campus Activewear Limited is tapping the markets with its offer for sale of 479.50 lakh shares in a price band of Rs278-292. The issue would open on Tuesday (April 26) and close on Thursday (April 28). The company would raise Rs1,394.3 crores at the top end of the price band.

The company is India’s largest manufacturer and seller of sports and athleisure footwear in the men, women and kids’ category. They launched the brand in 2006 and clocked sales of Rs 700 crore in the year ended March 2021. Looking at the nine months numbers for the period ended December 2021, revenues clocked were Rs842 crore. If one were to extrapolate these numbers for the period ending March 2022, it could be presumed that the sales would have crossed the 1,100 crore mark. It now appears that the company has reached an inflection point and one could expect the present number of Rs1,100 crore to more than double in the next two years because of its distribution reach, number of SKU’s, price points from Rs700-3500 and acceptability as an aspirational brand amongst tier-2 and tier-3 towns which account for about 3/4th of its total sales.

The company has a reasonable market share of about 17 per cent in the categories in which it operates. Roughly half the category is catered by the unorganised sector and the remaining half by the organised sector. With GST being introduced and the duty on footwear being increased at the beginning of the year, the unorganised market is losing dominance and market share at a rapid pace. Suffice to say that it is being replaced by the organised sector and here Campus has the advantage.

The company is present in the market place through over 19,200 retailers who are present in 652 cities across 28 states. The company has over 425 distributors across the country. In terms of new designs, it launched 583 new designs in the previous year. It has over 1,433 active designs for men, 241 active designs for women and 485 active designs for children and kids. Keeping the market fed with such a large number of SKU’s involves careful planning and execution. The company has direct to consumer initiative and uses third party websites to sell its products without allowing unhealthy competition. It spends about 6 per cent of its revenues on branding and digital initiatives.

The company is a fairly compact manufacturer relying heavily on its dedicated and exclusive team of vendor suppliers who provide the bulk of the uppers and soles required for the shoes that Campus makes. Campus produces about 10 per cent of its uppers and 37 per cent of its soles. However, the entire assembly of shoes is done inhouse and this ensures quality and strict control of inventory.

Campus products are available online with all of the leading brands like Flipkart, Amazon, Myntra and Nykaa. It also has its presence in large format stores and is steadily growing its EBO network. The company sold about 1.33 crore pairs in nine months and is expected to touch or cross the 2 crore mark at the end of the year March 2022.

The company reported and EPS of Rs 2.82 for the nine months ended December 2021 against similar previous year period of Rs 0.56. For the full year ended March 2021 the EPS was Rs 0.88. One must keep in mind that this was the period of Covid-19 when there were many constraints affecting industry and retailing as well. The full year earnings for March 22 on an annualised basis of 9 months December 21 would be Rs 3.76. Based on this EPS the PE band is 73.9-77.65. This compares very favourably with the competitors as listed in the RHP.

Campus has products which are competing with the likes of the multinational brands like Adidas, Reebok and Puma. The Indian brands who are partial competitors as they are not fully present across the value chain include names like Bata, Liberty and Relaxo.

Considering the fact that the company is at an inflection point and is well poised to more than double its revenue and profits in the next 24 months, based on annualised numbers for the year ended March 2022, the company offers scope for appreciation for medium- and long-term investors.

Being an Indian brand with no exports and clear focus on the sector in which it is operating gives the comfort that the company means business. The promoters of the company post this issue would continue to own close to 74-75 per cent of the company and there would be no overhang of any further sale. Subscription to the above issue is warranted and an investor would get returns on listing and in the medium to long term as well.

Markets continued their volatile ways in the five-day week gone by. They lost on the first two days, gained on the next two and lost again on the final day. At the end of the week, BSESENSEX was down 1,141.78 points or 1.96% to close at 57,197.15 points. NIFTY lost 303.70 points or 1.74% to close at 17,171.95 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.67%, 1.58% and 1.74% respectively. BSEMIDCAP was down 1.15% while BSESMALLCAP was down 0.93%.

The Indian Rupee lost 30 paisa or 0.39% to close at Rs 76.48 to the US Dollar. Dow Jones lost on three of the five days and closed with losses of 639.83 points or 1.86% at 33,811.40 points. On Friday Dow lost a massive 980 points which was the largest single day loss in over 1.5 years. Incidentally this is the fourth consecutive weekly loss for Dow. The sharp fall on Friday was because the US FED is expected to raise interest rates in their upcoming meeting on the 3rd and 4th May by 50 basis points. Readers would recall that inflation in the US has skyrocketed and is currently at unprecedented levels. While there would be tightening of rates for sure, it would call for a series of hikes which would be beyond the customary 25 basis points.

The management of HDFC Bank and HDFC Limited have accepted that they have not been able to convince the market and analysts of the benefits that would accrue to the combined twins. This is after the fact that even three weeks after the merger announcement, shares continue to trade at a substantial discount to what they were trading prior to the announcement. This does not take into account the fact that there was a massive first day jump on the 4th of April when the merger was announced. Shares of HDFC closed at Rs 2,206 against Rs 2,451 on the 1st of April, while HDFC Bank closed at Rs 1,355 against Rs 1,506 earlier. Their highs on the 4th of April were Rs 2,855 and Rs 1,722 respectively.

The government has announced PLI (production linked incentive) scheme for 14 sectors. The total investment committed is Rs 2.34 lac crs. This is expected to bring a total production of 28.15 lac crs and create employment of 6.45 million jobs over the next five years. As investments pour out under the schemes and the benefits are visible to all, expect the government to roll out the same in sectors not covered as yet.

The week ahead sees two primary market issues hitting the capital markets. These issues would be the first under the new regime where changes have been made in respect of leveraging restricted to Rs 1 cr, split of the HNI bucket into two parts of 2-10 lacs and 10 lacs and over and the anchor allocation lock-in being split into two with a lock-in of 30 days and 90 days. This would lead to substantially lower responses in the HNI segment and also a significant drop in the QIB segment as listing gains would be pruned on account of no funding cost being a part of the grey market premium.

The first issue is from Campus Activewear Limited which is tapping the markets with its offer for sale of 479.50 lac shares in a price band of Rs 278-292. The issue opens on Tuesday the 26th of April and closes on Thursday the 28th of April. The company would raise Rs 1,394.3 crs at the top end of the price band.

The company is India’s largest manufacturer and seller of sports and athleisure footwear in the men, women and kids’ category. They launched the brand in 2006 and clocked sales of Rs 700 crs in the year ended March 2021. It is believed, looking at the nine months numbers for the year to end March 22 that the sales would have crossed the 1,100 cr mark. It now appears that the company is at an inflection point and one could expect the present number of Rs 1,100 crs to more than double in the next two years because of its distribution reach, SKU’s, price points from Rs 700-3500 and acceptability as an aspirational brand amongst tier2 and tier3 which account for about 3/4th of its total sales.

The company reported and EPS of Rs 2.82 for the nine months ended December 2021 against similar previous year period of Rs 0.56. For the full year ended March 2021 the EPS was Rs 0.88. One must keep in mind that this was the period of covid-19 when there were many constraints affecting industry and retailing as well. The full year earnings for March 22 on an annualised basis of 9 months December 21 would be Rs 3.76. Based on this EPS the PE band is 73.9-77.65. This compares very favourably with the competitors as listed in the RHP.

Considering the fact that the company is at inflection point and is well poised to more than double its revenue and profits in the next 24 months, the company offers scope for appreciation for medium- and long-term investors.

The second issue is from Rainbow Children’s Medicare Limited which is tapping the markets with its fresh issue for Rs 280 crs and an offer for sale of 2.40 cr shares in a price band of Rs 516-542. The issue opens on Wednesday the 27th of April and closes on Friday the 29th of April.

The company as the name suggests is one of India’s largest paediatric multi-speciality hospital chain, having 14 hospitals and 3 outpatient clinics. They are located in six cities and with 1,500 operational hospital beds. They are a very large obstetrics and gynaecology service provider rendering quality service to its patients. Their area of domination is Hyderabad and Bengaluru which accounts for more than 75% of their total revenues. The hospital company is building on its hub and spoke model to grow their geographical presence. It has entered with a hospital in Delhi and would be growing their chain in NCR region in the near future. Ove r the next three years they would be adding 500 beds in a phased manner, details of which have been shared and finalised in the document.
The majority of doctors who are part of the hospital are full time associated with the hospital which ensures that the company gets its fair share of revenues. There is also an ownership scheme formulated for doctors which brings about continuity and a sense of ownership amongst the doctors.

The company reported revenues of Rs 761.3 crs for the nine months ended December 21, adjusted EBITDA of Rs 256.7 crs and a profit after tax of Rs 126.4 crs. The EPS for the period would be Rs 4.74 on a fully diluted basis for the nine months. If one were to annualise the same it would be Rs 6.32. The PE band on the fully diluted and annualised EPS for the year ended March 2022 would be 81.6-85.75 times. While there is currently no listed peer in the children’s hospital range currently, Cloud nine has recently filed its document to tap the markets as well.

The asking price is steep and offers little or no returns in the short term. One may look at the company post listing when considering that new subscription norms have been issued, the share may be available at more affordable valuations.

LIC is expected to have its roadshow for its forthcoming IPO probably on Friday in the coming week. The size of the issue has been further reduced and so has the valuations. Details of the issue are expected shortly over the next couple of days.

Coming to the markets in the coming week, they are expected to open weaker looking at the significant fall witnessed in Dow on Friday. This fall was on account of a higher interest rate hike expected in the forthcoming FED meeting. The Russia-Ukraine war has entered the third month with no resolution. Ne does hear that the Ukrainian Premier wants a meeting but he ensures that the same doesn’t happen because of some conditions which crop up. In any case markets have discounted the war and are moving on.

April futures expire on Thursday the 28th of April. Currently the series is down 292.80 points or 1.68% which is not significant. With a weak Monday on the cards, the bulls need to pull a rabbit out of the hat to salvage the series which is increasingly looking like going in favour of the bears.

Last week’s lows of 59,009 on BSESENSEX and 16,824 on NIFTY will be significant supports for the market on their way down. If these levels are broken the next and final support levels would be at 55,000 on BSESENSEX and 16,450-16480 on NIFTY. In any case markets have already become vulnerable and any further fall would make them even more vulnerable.

The strategy for the week would be to buy on really big falls and sell on any strong rallies. The markets need to find their level and it would take some time to do so. The breadth of the market has increased and more and more Smallcap and midcap stocks are participating in the movement. By and large this pack is outperforming the benchmark indices. Stick to large cap for safety and trade cautiously.