Markets began the week with the key level of 11,700-750 at the back of their mind. The level was respected for more than half the trading day and then it broke. Once that happened the low of the day was 11,657.75 and markets recovered marginally to close at 11,672.15 points. One thought this was the beginning of another fall but markets willed otherwise. They rose for the next three days and lost on Friday. The week ended with BSESENSEX losing 257.58 points or 0.65% to close at 39,194.49 points while NIFTY lost 99.20 points or 0.84% to close at 11,724.10 points. The broader indices saw BSE100, BSE200 and BSE500 lose 0.77%, 0.77% and 0.86% respectively.
The fall on Monday and Friday saw the BSESENSEX lose more than 400 points on each day and they lost 898 points combined. They regained 641 points on three days to lose 257 points for the week. NIFTY similarly lost 151 points and 107 points for a loss of 258 points on the two days. They recovered 159 over the next three to finally settle with losses of 99 points. This data has been given to illustrate two things, firstly the volatility and secondly the trigger-happy nature of the market where they are more than happy to short the market at every available opportunity. This level of 11,700 on NIFTY becomes a key pivot for the week.
Dow Jones had a strong showing and gained 629.52 points or 2.41% to close at 26,719.13 points. Incidentally the FED decided to keep interest rates unchanged but hinted that they would be willing to cut if the need arose.
Global tensions continue to rise and Iran shot down an unmanned high-tech surveillance Drone of the US which prompted them to launch an attack on Iran which was called off with ten minutes to go before it actually happened. The reason was that President Trump asked how many casualties the attack could lead to and on being told that the number could be as high as 150 decided against it. Crude prices have since risen but not alarmingly as yet.
There is an IPO from Indiamart Intermesh Limited opening on Monday the 24th of June and closing on Wednesday the 26th of June. The price band for the secondary issue consisting of entirely an offer for sale of 48,87,862 shares is Rs 970-973 and would garner Rs 475 crs. The headline PE ratio is an unheard of 127.40 to 127.79 times. This is on account of the treatment of IND-AS accounting standard where there is a non-cash entry of Rs 65 crs on account of Compulsory Convertible Cumulative Preference shares (CCCP) which were converted in financial year 2019. If this item is reversed, then the PE becomes a much more respectable 32.8 times.
The company is in the business of online B2B marketplace for business products and services. The revenue model is from subscription fee paid by sellers. The growth in revenue from paying subscribers is 19.68%. the total revenue was Rs 548.4 crs in the year ended March 2019. The company has deferred revenue of Rs 586 crs which is revenue received in advance from subscription This would typically get adjusted in 20 months. The EBITDA for March 2019 was Rs 82.3 crs. The company is debt free and has substantial cash holdings. The issue is likely to do well and would have listing gains. This incidentally would be the first IPO in Modi 2.0 regime.
Any business which has strong paying subscriber base and generates business for its subscribers would have a good future. There are competing sites even today but the difference is the traffic generated. Going forward more such sites are likely. What would be the key differentiator is who gets the business? Who gets the customer? I believe in this aspect Indiamart is on solid ground.
June futures would expire on Thursday the 27th of June. The current value of NIFTY is lower by 221.80 points or 1.86%. The difference is insignificant considering the volatility and the same could move in either direction.
With the budget week beginning from the 1st of July, expect the markets to become expectant. There would be wild rumours about what is coming and what is going. Remember that this government is here in their second term, they have a roadmap and there is no election to be fought next year. Trade cautiously.
