Markets in the week gone by behaved as if there were two distinct halves. The first three days of the week saw markets gain and then correct themselves in the remaining two days. BSESENSEX gained 1,444.59 points or 2.53% to close at 58,644.82 points while NIFTY gained 414.35 points or 2.42% to close at 17,516.30 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.44%, 2.43% and 2.45% respectively. BSEMIDCAP was up 2.33% while BSESMALLCAP gained 2.63%.

Its important to note that markets hit key resistance levels on the way up, and reacted quite sharply from such levels. The range for the week was 56,400 – 59650 on BSESENSEX while it was 16825 – 17,800 on NIFTY. This would continue to be the range for the coming week as well with a couple of factors deciding the direction. However, volatility would be the norm and even though the net change may not be as much on a daily basis the swings would remain. Key factors would be the net sales by FII’s and global markets.

The Indian Rupee gained 34 paisa or 1.05% to close at Rs 74.70 to the US Dollar. Dow Jones gained on the first three days of the week and lost on the remaining two, similar to what happened in India. It gained 364.27 points or 1.05% to close at 35,089.74 points. Facebook or Meta had a disastrous outing post its results for the quarter and saw a massive fall of around 26%. While it fell marginally on Friday, the damage was done with the share down a massive 21.15% during the week. The closing price was USD 237.09, down 63.59 dollars for the week.

In primary markets news, we saw one issue list, one issue complete subscription and yet another issue opening for subscription. The issue to list was AGS Transact Technologies Limited which had issued shares at Rs 175. The share closed on debut day at Rs 161.20, a loss of Rs 13.80 or 7.83%. During the remaining part of the week, the share recovered some ground and closed at Rs 165.60, down Rs 9.40 or 5.37%.

The issue from Adani Wilmar Limited closed for subscription on Monday the 31st of January. The issue for Rs 3,600 crs was subscribed 18.33 times overall backed by strong response from HNI’s. The QIB portion was subscribed 6.04 times, HNI 59.40 times, Retail 4.14 times, Employee 0.54 times and Shareholder reservation 35.17 times. The price band was Rs 218-230. The issue would list on Tuesday the 8th of February with the allotment of shares done at the top end of the price band at Rs 230.

The issue from Vedant Fashions Limited is tapping the capital markets with its offer for sale of 3,63,64,838 shares in a price band of Rs 824-866. The issue has opened on Friday the 4th of February and would close on Tuesday the 8th of February. The issue would garner Rs 3,149.19 crs at the top end of the price band. The market capitalisation at the top end of the price band would be Rs 21,017 crs for Vedant Fashions Limited. For the record, the company reported revenues of Rs 564.81 crs for the year ended March 2021 and a net profit of Rs 132.90 crs.

The details given in the price band advertisement issued by the company state that the PE band for the company is 153.73-161.57 times based on the EPS of Rs 5.36 for the year ended March 2021. A new matrix mentioned as per the SEBI advertisement gives the market cap to revenue at 37.21 times based on revenues for the year ended March 2021. Further the advertisement mentions the average PE ratio for the NIFTY 50 to be at 23.47 times against the price band mentioned of the company at 161.57 times. The multiplier is a steep 6.88 times.

Let us come to the business of the company. It is a top end fashion retailer having its stores as EBO’s in malls, fashion streets across cities and towns. The company retails wedding and celebration wear, a new category created by the company to identify itself. The category includes men, women and children wear. The size of this industry is estimated at a massive 1.02 lac crs with the bulk of the same being women wear which is not the strongest segment for Vedant Fashions. For Vedant, the strongest segment is the men’s segment where their premium brand is ‘Manyavar’. Sales reported by Vedant Fashions in the year ended March 2021 were about Rs 565 crs which means a little under 0.6% of the category that the company has mentioned as wedding and celebration wear. They have not mentioned any competitors for them in the RHP either. When there is such a large category and no meaningful names to talk about, it makes the categorisation itself difficult to accept.

Some names which come to mind in this segment include TCNS Brands Limited a women’s fashion brand, Raymond’s Limited, a premium men’s brand and Reliance Trends. While all these brands put together would hardly total Rs 3000-3500 crs in top line, what is really intriguing is the size of the category and the players.

The issue from Vedant Fashions is a high profile and hyped issue coming with unheard of valuations. The company has created a new category for itself in which it operates. It is for the investor to decide whether he would like to invest in such an issue or take a measured call and then decide what should be his response to such an issue. I urge investors to do some homework as there are still two days left before the issue closes. At the end of day one, the issue overall is subscribed 0.14 times with the retail portion subscribed 22%.

The Union budget was announced on the 1st of February and it was better than expected. The markets were worried about populism with 5 states headed for polls from the 10th of February. On the contrary the sum and substance of the budget was to spend on infrastructure, give a boost to capex and keep things by and large the same. There was no tinkering, no changes in tax laws and incentives announced in extending the period by one year for new manufacturing units. Apart from the 14 sectors where PLI schemes have been already announced, the budget announced one more for the solar module and production sector with an outlay of Rs 22,500 crs. Surprisingly with talk of taxing the super-rich, nothing was done either on the tax front or the wealth tax front. Incentives have been given for GIFT city and I believe that with the UAE levying tax at 9%, the new scheme announced for GIFT City may see a shift of P-Notes to this place. More clarity on the same would be needed.

The week ahead sees RBI meet between the 7th and 9th of February for its monetary policy meeting. It is widely believed that key policy rates would be kept unchanged and signal the same message that the budget has given. While there could be a commentary which signals that inflation is a concern and that tightening of rates does happen going forward, things would remain at status quo currently.

Coming to the markets in the week ahead, the event of the week would be the filing of DRHP of LIC prospectus in the coming week. This would be a fast-track issue and would see the light of day in roughly four to five weeks. The issue would set a new record for receiving the largest number of applications ever, and it may be a good idea if the people connected with the issue look at keeping an extra day for just retail investors in the issue. Against the normal three days that an issue is open, this could remain open for an additional fourth day for just retail investors.

Markets would be volatile and trade in the broad band as mentioned earlier. They would be volatile and have no trend. Key factor would be FII trade who continue to be net sellers. Trade cautiously.

Markets continued to remain volatile and unsure of which direction they should move. Post the FED meeting what did become clear was the fact that interest rates would rise in March and that the rate of increase would be more than the customary 25 basis points. Various brokerage houses internationally have anticipated that there could be as many as 4-5 rate hikes in 2022. How many will finally happen is anybody’s guess but the fact that easy money will become dearer is a certainty. This is probably why the FII’s have been big sellers in Indian markets and are adjusting their portfolio ahead of the new stance that would happen to post the tightening.

Markets in India rose on one day and fell on three days in a four-day trading week. BSESENSEX lost 1,836.95 points or 3.11% to close at 57,200.23 points while NIFTY lost 515.20 points or 2.92% to close at 17,101.95 points. The broader indices saw BSE100, BSE200 and BSE500 lose 2.90%, 2.93% and 2.99% respectively. BSEMIDCAP was down 3.07% while BSESMALLCAP lost 3.43%.

Dow Jones was very volatile and ended the week with gains of 459.97 points or 1.34% to close at 34,725.47 points. Dow gained on two days, lost on two, and was flat on the fifth day. However, intraday volatility was at its peak and one saw really sharp moves throughout the day. The Indian Rupee lost 66 paise or 0.89% to close at Rs 75.04 to the US Dollar.

January futures expired with minor losses of 93.80 points or 0.55% at 17,110.15 points. What is worth noting is the fact that during the month, the high registered on NIFTY was 18,350 points. At this level, the series would have been higher by 1,240 points against a loss of 93.80 points that the series ended at.

The week ahead sees the Union Budget is presented on Tuesday the 1st of February. While there are not too many expectations from the budget as of now, one can only speculate on the possible outcome. The government has its options cut out considering the fact that it has been covid and its after-effects for almost 22 months now. The economy has been showing signs of being resilient and economic indicators point to the fact that there is a sharp bounce back in the same. What new impetus can be given at this point to kickstart the economy further will need wild imagination as well. On the positive side, one can be sure that the mega IPO from LIC is expected shortly, may curb the government from doing any tinkering which may affect stock markets negatively. At the same time, elections to five states would be held in the next 10-36 days and this would ensure that any measures which would hurt the masses would not happen.

One may expect measures to increase government spending on infrastructure. In line with this, the proposal which has been discussed for some time now where there may be incentives for investing in approved government schemes involved in infrastructure may finally see light this year.

In primary market news, the IPO from Adani Wilmar Limited to raise Rs 3,600 crs has completed two of the three days for which the IPO is open. The issue price band is Rs 218-230 and is subscribed 1.19 times so far. The anchor portion received a very strong subscription from the Government of Singapore which subscribed to 47.88% of the anchor book. This subscription would be on the back of Wilmar Limited which is a 50:50 JV partner in the company and is a Singaporean company.

The company Adani Wilmar Limited is into the business of edible oils, packaged foods company, stearic acid, glycerine, and the largest exporter of castor oil. The company processes edible oil from crude palm oil as well as oil seeds across its multiple refineries spread across the country. The company sells branded packaged foods and is also ready-to-cook foods through its flagship brand Fortune. It also has a setup in Bangladesh where it is trying to replicate the Indian model as the country Bangladesh is a model of West Bengal, in terms of market, likes, and dislikes, and also opportunities.

Coming to the revenues, the company reported revenues of Rs 37,100 crs for the year ended March 2021 and an EBITDA of Rs 1,400 crs. Over the years the company has focused on converting itself into a Food FMCG company with a focus on almost everything that is required in the kitchen. Two items it does not include are dairy products and sugar. Its revenue breakup across the three verticals is, Rs 305 billion in edible oils, 19 billion in food and FMCG, and 47 billion in Industry essentials.

The company reported an EPS of Rs 6.37 for the year ended March 2021. Based on this EPS, the PE multiple of the company at the price band of Rs 218-230, is 34.22-36.11. The company has compared itself with the FMCG companies which are not strictly comparable. This is into the commodities business and this is affected by inflation and enjoys very poor margins unless you reach a significant scale. Considering the lackluster response that the issue has received so far, the issue may be given a skip and looked at on listing instead.

The offer for sale from AGS Transact Limited which had tapped the capital markets with its issue would be listed on Monday the 31st of January. The price band was Rs 166-175, and the issue was subscribed 7.99 times.

Of the 17 recently listed shares since 18th November, 5 shares are trading below their issue price. Last week, in particular, 16 of the 17 companies lost ground. The shares on the receiving side were those from the tech platforms and they lost considerable ground with many of them making new 52-week lows. SEBI is insisting with many of these loss-making tech companies who have filed their DRHP’s and are looking to tap the markets with the RHP, to submit the latest accounts updated as of 31st December. This has happened after the way many of these companies have fared on the markets and the way they raised money for acquisitions which have since been revised.

On the covid-19 front, India has vaccinated 165.73 cr people so far of which 94.07 cr are with the first vaccination while 70.54 cr people have been fully vaccinated.

Coming to the markets in the coming week, it’s a new series but has the budget to be presented on Tuesday. Global markets have just witnessed an extreme bout of enhanced volatility and still seem to be reeling under it. Expect the same to continue. In India, FII’s have been continuously selling and adding to the pressure that markets are facing. With the budget due on Tuesday, markets would remain volatile without a doubt. On the positive side, if nothing majorly negative for the markets does happen, we have a possibility for a small rise happening. Traders are currently scared of having overnight positions and prefer squaring off at end of the day. In such a scenario, expect markets to have a clearer path and direction when trading begins on Wednesday in the Indian markets.