Markets had another good performance last week and gained ground. BSESENSEX gained 1,019.46 points or 2.26% to close at 46,099.01 points. NIFTY gained 255.30 points or 1.93% to close at 13,513.85 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.91%, 1.78% and 1.73% respectively. BSEMIDCAP gained 0.76% while BSESMALLCAP was up 1.36%. Benchmark indices hit new highs during the course of the week with BSESENSEX touching 46,309.63 points and NIFTY 13,579.35 points. Markets gained on four of the five trading days but volatility continues to be high on expected lines.
The Indian Rupee gained 15 paisa or 0.20% to close at Rs 73.65 to the US Dollar. Dow Jones lost 171.89 points or 0.57% to close at 30,046.37 points.
In economic news, Industrial production registered a growth of 3.6% and saw an eight-month high. In news concerning the stock market, the number of new demat accounts opened during the eight-month period April-November 2020 saw about 78.5 lac new accounts. This is roughly 19% over the base of 4 cr accounts as of March 2020. While a small percentage of these accounts could be multiple accounts opened by existing demat account holders due to the pandemic linked with the broker, it could be safely presumed that about 85-90% would be first timers. This would also explain the increase of investors applying for shares in the primary markets.
The week ahead sees probably the last primary market issue for the calendar year 2020 from Mrs Bector’s Food Specialities Limited which opens on Tuesday the 15th of December and closes on Thursday the 17th of December. The company is raising Rs 40.5 crs by way of fresh issue and Rs 500 crs by way of an offer for sale. The price band is Rs 286-288. The company had revenues of Rs 762 crs for the year ended March 2020 and a net profit of Rs 30crs. The EPS for the year was Rs 5.31 and the PE ratio a steep 53.96-54.24. Covid-19 has by and large benefited the company as its sale of biscuits and bread went up significantly while the institutional sales of buns used in burgers by McDonalds and Burger Kings was substantially lower. Overall, the company benefited and this could put them on a higher growth trajectory once the institutional sales are back to normal.
An interesting point is that the largest competitor in this space is Nestle India Limited. When this company went public its original name was Food Specialities Limited. It was only on 24th of March 1989 that the name was changed to Nestle India Limited. The issue from Mrs Bector’s will do very well at the subscription stage without doubt considering the business of biscuits and bread and bakery products that it is in. The company needs to use the platform it has built and the stock market listing to move from being a North India biscuit player to a pan-India player. Similarly, in the bakery division it needs to move from its presence in Delhi-NCR, Mumbai-Pune and Bengaluru to many more markets. The business is competitive and profits come from scale. Compared to Mrs Bector’s top line of about 760 Rs, Britannia has a top line of Rs 11,800 crs and Nestle a shade higher at Rs 12,600 crs. The company needs to grow fast and has to build capacity at a rapid pace to take advantage of the ever-growing market.
On the covid-19 front, the world saw 7,26,46,646 patients, 16,18,908 deaths and 5,08,64,816 patients recovering. In India we had 98,84,716 patients, 1,43,393 deaths and 93,88,159 patients recovering. Compared to the previous week, the world saw 52,60,384 new patients, 77,267 deaths and 42,84,683 patients recovering. In India, we saw 2,07,915 new patients, 2,803 deaths and 2,49,988 people recovering. Yet again patients recovering are substantially higher than new patients. Further the new patient rate has fallen substantially and is now closer to the 2-lac mark compared to the 6.25-6.5 lac mark in September. We also hear of vaccines which have entered the 3rd stage of clinical trials and they seem to be much nearer reality than ever before.
Global liquidity continues to fuel the markets and in the current month roughly 27,000 crs have been invested by FPI’s. One is not sure whether the flows would continue or take a break on historical basis as has been seen during Christmas in earlier years. Almost everyone in the market is bearish and expect markets to fall after a spectacular rally over the last 8 months and markets are therefore very interestingly poised. Who will blink first, bulls or bears, is the key question? One normally sees markets peak out with a flourish where bears are forced to cover and then the bulls just let go. Will that be the pattern this time as well or something different? The stage is set for the final showdown. It’s a matter of days and certainly not weeks. It makes sense to use rallies to sell and wait for the imminent correction before stepping back to markets.
Don’t get tempted by the sharp upward movement. The final thrust or the plunge is the biggest. Expect a big swing day in the coming week. Trade cautiously.
