The week gone by was extremely volatile and choppy. We began with a correction. Then a corrective up move, followed by a sharp correction, yet another corrective up move and then yet another correction. Though markets gained on two of the five trading sessions and lost on three, the intensity of the fall has shaken the markets. It appears the momentum is lost and probably enough signals are available to indicate some more correction in the coming week. 

One normally associates Friday the 13th as an ill-omen. This time we had a double whammy where markets fell sharply on the 13th and then fell again the following Friday, the 15th of March. So, in short the 13th and Friday individually hit the markets quite sharply. BSESENSEX lost 1,475.96 points or 1.99% to close at 72,643.43 points while NIFTY lost 470.20 points or 2.09% to close at 22,023.35 points. The broader markets saw BSE100, BSE200 and BSE500 lose 2.35%, 2.60% and 2.94% respectively. There was worse to follow in BSEMIDCAP which lost 4.02% and BSESMALLCAP which was down 5.91%. Very clearly the beating in midcap and small cap was quite severe. 

The Indian Rupee lost 14 paisa or 0.17% to close at Rs 82.88 to the US Dollar. Dow Jones lost on two of the five sessions and gained on three. It closed virtually flat, down 8.38 points or 0.02% to close at 38,714.77 points. What is becoming worrisome in the US is once again inflation, and with present levels, it appears that the rate cut would just get postponed. 

Elections to the Lok Sabha have been announced and they will be held in seven phases beginning with the first phase being held on 19th April.  The remaining would be held on 26th April, 7th May, 13th May, 20th May, 25th May and 1st June. Counting would be held on the 4th of June. With the poll notification being done, the code of conduct is applicable with immediate effect and one would see political parties get to work on the business end of the elections. 

Primary markets saw a lot of activity in the week gone by. We had three listings of equity and one of a road Invit, one other issue which saw its issue open and close for subscription, and one other issue which had opened for subscription but would close on Monday. 

The first share to list was from R K Swamy who had issued shares at Rs 288. The listing price was at Rs 252, a discount of Rs 36 or 12.5%. After a volatile day where the high and low was Rs 284.50 and Rs 248, the share closed debut day at Rs 263.25, a loss of Rs 24.75 or 8.59%. By the end of the week, the share recovered to close at Rs 279.40, a loss of Rs 8.60 or 2.99%. 

The other listing on Tuesday was from Bharat Invit, which had allotted units at Rs 100. The unit debuted at Rs 101.10 and closed on debut day at Rs 103.05, a gain of Rs 3.05 or 3.05%.  This instrument has some unique features as all the underlying assets are of ‘HAM’ projects where there is no risk of toll collections. Second, the income and expense of the trust is linked to a floating rate of interest which makes the yield insulated from rate fluctuations. The Invit closed on Friday at Rs 103.40 a gain of Rs 3.40 or 3.40%. 

The second listing was from J G Chemicals Limited which listed on Wednesday and had a tepid listing. The debut price was Rs 211, for the company which had issued shares at Rs 221. The loss was Rs 10 or 4.52%. The share closed day one with further losses at Rs 184.80, a loss of Rs 36.20 or 16.38%. It regained some ground over the next two days and closed Friday at Rs 194.85, a loss of Rs 26.15 or 11.83%. 

The third listing was from Gopal Snacks Limited which happened on Thursday, the 14th of March. The company had issued shares at Rs 401, and the share debuted at Rs 350, a loss of Rs 51. By the end of the day, the share gained some ground and closed at Rs 360.05, a loss of Rs 40.95 or 10.21%. On Friday, the share recovered some ground and closed at Rs 378.70, a loss of Rs 22.30 or 5.56%. 

The issue from Popular Vehicles and Services Limited, a 2-wheeler, 3-wheeler, 4-wheeler and commercial vehicles distributor from Sotuh India tapped the capital markets with its fresh issue of Rs 250 crores and an offer for sale of 1,19,17,075 equity shares in a price band of Rs 280-295. The issue had a tough time and managed to get subscribed on the basis of response from QIBs. The issue was subscribed 1.24 times overall with QIB portion subscribed 1.92 times, HNI undersubscribed at 0.67 times and Retail portion subscribed 1.07 times. There were 1.35 lakh applications. 

The issue from Krystal Integrated Services Limited opened on Thursday, the 14th of March and would close on Monday the 18th of March. The issue consists of a fresh issue of Rs 175 crores and an offer for sale of 17.50 lakh shares in a price band of Rs 680-715. At the end of the second day of bidding, the issue was subscribed 0.72 times with QIB portion subscribed 0.57 times, HNI portion subscribed 1.19 times and Retail portion subscribed 0.6 times. There were 32,989 applications till the end of day two. 

Primary markets on the main board seem to have reached a level from where they are headed downhill. Performance of newly listed shares is not making money for investors who are allotted shares. Subscription levels have dropped significantly and when issue after issue lists and trades at a discount, it’s time that merchant bankers and promoters take a hard look at their asking price. While one may always argue that investment in primary issues is not about first day exit, but that is what it has all become about. More than 50% of investors on day one change hands and it’s only the new set of investors who join on day one, who have any sort of holding period in the company going forward. If sanity does not come in sooner than later, we would again see a large period of lull where there are no issues tapping the main board. 

The week ahead would be choppy and volatile and would trade with a negative bias. The movement over the previous week has seen markets getting shaken and losing momentum. While the bounce on Thursday made people believe that the worst is over, the fall on Friday has caused concern once again. It makes sense to lighten one’s exposure in the markets as we approach the end of the financial year 2023-2024 and enter the election period as well. While there are multiple resistances between the current levels of the indices on the way upward till the top of 74,245 points on BSESENSEX and 22,526 points on NIFTY, we have just one support on the downside around 21,825-21,860 points on NIFTY. Last Wednesday we touched a level of 21,905 points before we bounced on Thursday. The safety factor is not too big. If this were to break we would have a newer target of around 21,450-500 points which could cause a sharp correction in next to no time. 

The strategy for the week ahead would be to remain in large cap stocks and use any rallies in the market to sell midcap and small cap stocks. There would be no policy statements going forward as the poll notification has happened and results for the 4th quarter and year ended March 24 are roughly four weeks away. Brace for a volatile week and use rallies to sell and only sharp dips to do select purchases in the large cap space. 

Trade cautiously.

It was a wild, volatile and eventful week which got extended into Saturday as well. Expiry happened on Thursday the 29th February which was a leap day and till that event was over, markets were trading in negative territory for the week. Friday was the turning point and markets went into a new orbit all over again. Testing for the disaster recovery site of the exchange happened on Saturday and that led to the benchmark indices adding some more points to their ever-growing stature. At the end of it all, markets gained on four of the six trading sessions and lost on two. BSESENSEX was up 663.35 points or 0.91% to close at 73,806.15 points while NIFTY gained 165.70 points or 0.75% to close at 22,378.40 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.67%, 0.64% and 0.53% respectively. BSEMIDCAP gained 0.07% while BSESMALLCAP was down 0.39%. 

BSESENSEX, which was lagging NIFTY in terms of making a new high, did so on Friday and made a new high at 73,819.21 points. It again crossed this level on Saturday and made a new high at 73,994.70 points. NIFTY made new highs on Friday and Saturday and the new lifetime intraday high now stands at 22,419.55 points. Incidentally the gains of Friday were a massive 1,245 points on BSESENSEX and at 356 points on NIFTY. In relation to the weekly gains this was almost double when compared to BSESENSEX and a little more than double in terms of NIFTY. Clearly shows what the first day of a new series and news of the GDP in the third quarter growing higher than expectations can do to the markets. 

The Indian Rupee gained 4 paisa or 0.05% to close at Rs 82.90 to the US Dollar. Dow Jones had a fairly quiet and range bound week. It gained on two of the sessions and lost on three. At the end of the week, it was down 44.15 points or 0.11% to close at 39,087.38 points. 

In economic news, FPIs bought shares worth Rs 5,107 crs in February after being net sellers of over Rs 25,000 in January. Further the GDP numbers for Q3 of FY23-24 came at an impressive 8.4%. This was probably the reason why markets catapulted on Friday and virtually went into a new orbit. 

February futures expired on a weakish note in the last week of the series. The series ended with gains of 630.20 points or 2.95% to close at 21,987.38 points. 

There was a lot of activity in the primary markets in the week gone by. The week saw two listings, three IPOs open and close for subscription and another three companies had their roadshows and would be opening their issues for subscription in the coming week. 

The first company to list was Juniper Hotels Limited which listed its shares on Tuesday the 27th of February. The company had issued shares at Rs 360 and the issue was not very well received. The share opened at Rs 361.20 and closed 10% higher at upper circuit at Rs 397.30. At the end of the week, the share had gained strongly, closing at Rs 484.85, a gain of Rs 124.85 or 34.68%. 

The second share to list was GPT Healthcare Limited which had issued shares at Rs 186. The share debuted on the bourses on Thursday the 129th of February. The discovered price was Rs 216.15 and the share closed day one at Rs 200.75, a gain of Rs 14.75 or 7.93%. Over the next two days, the share lost ground and closed at Rs 191.75, a gain of Rs 5.75 or 3.09%. 

The first issue to open and close for subscription was Platinum Industries Limited which had tapped the markets with its issue for Rs 235.32 crs in a price band of Rs 162-171. The issue was oversubscribed an overall 98.73 times with QIB portion subscribed 151 times, HNI 141.69 times and Retail portion subscribed 50.45 times. There were 32.85 lac applications in all. 

The second issue was Exicom Tele-systems Limited which had tapped the markets with its fresh issue for Rs 329 crs and an offer for sale of 70.42 lac shares in a price band of Rs 135-142. The issue was subscribed 129.19 times. The QIB portion was subscribed 121.80 times, HNI portion was subscribed 153.04 times and Retail portion was subscribed 117.83 times. There were 36.79 lac applications in all. 

The third issue was from Bharat Highways Invit. The price band was Rs 98-100. The issue size was Rs 2,500 crs of which 15% was allotted to the sponsor. The issue was subscribed 8.18 times overall with the QIB portion subscribed 9.1 times and Non QIB portion subscribed 7.07 times. There were 2.17 lac applications in all. 

The week ahead has three IPOs opening. The first is from R K Swamy Limited which is tapping the markets with its fresh issue for Rs 173 crs and an offer for sale of 87 lac shares in a price band of Rs 270-288. The issue would open on Monday the 4th of March and close on Wednesday the 6th of March 24. The company is into the business of integrated marketing communications which operates a full-scale advertising agency and market research business verticals. 

The company has over five decades of presence. It reported revenues of Rs 780 crs for the year ended March 23 on a gross basis and a net revenue of Rs 300 crs. Its EBITDA margins were 20.97% and PAT margin at 10.42%. There is cyclicality in the business of the company and broadly speaking roughly 40% of its revenues come in the first half and 60% in the second half. Profitability is even more skewed and the company in my opinion earns about 25% of profits in the first half and 75% in the second half. 

The company had an EPS of Rs 7.03 for the year ended March 23 and based on this EPS the PE multiple for share is 38.41-40.96. The company has its niche and is one of the leading companies in the advertising space standing up against the MNCs and doing well. The market research gives it the cutting edge. One should invest in the company for medium to long term gains while making some listing pop could always happen. 

The second share to tap the markets is J G Chemicals Limited. The issue would open on Tuesday the 5th of March and close on Thursday the 7th of March. The price band is Rs 210-221. The company is the largest producer of Zinc Oxide in the country. Its products are used in the tyre and rubber industry and J G Chemicals in a leading supplier to tyre manufacturers in the country and globally as well. The company has plants in Kolkata and in Naidupeta in Andhra Pradesh. 

The company reported revenues of Rs 795 crs for the year ended March 23. Its EPS was Rs 17.32 and the resultant PE for the issue is 12.12-12.76. While there are listed players in the segment, they are smaller compared to the company. The company offers appreciation for investors looking to invest with a medium-term outlook as the company has diversified and added products in the pharmaceutical and agricultural space as well. 

The third company tapping the capital markets with its offer for sale is Gopal Snacks Limited. The issue opens on Wednesday the 6th of March and closes on Monday the 11th of March. The price band of the issue is Rs 381-401. The company is a manufacturer and marketer of ethnic Indian snacks, gathiya and western snacks. The company is located in Rajkot with two plants in Rajkot and near Ahmedabad and one plant in Nagpur. The company reported revenues of Rs 1,394 crs for the year ended March 23, an EBITDA margin of 14.07% and a PAT margin of 8.06%. The profit after tax was Rs 112 crs. The EPS for the year ended March 23 was Rs 9.03 and the PE multiple at 42.24-44.46. The company compares favourably with its listed peers like Pratap Snacks and Bikaji Foods. 

The company is present in ten states and two Union Territories with Gujarat being the largest state in terms of sales. It has 617 distributors as of date and is looking to expand its footprint. The sales distribution in terms of products having a MRP of Rs 5 is 75% while that of Rs 10 is 8.23%. This gives the company an edge that the number of people who buy their products repeatedly is very high. A price point of Rs 5 ensures a decent snack for the customer of hygienic food which is properly packed and served in a safe and hygienic condition. The share offers appreciation in the short and medium term and could also give a listing pop for the flippers. 

Coming to the markets in the coming week, there is a trading holiday on Friday the 8th of March. This would reduce the week to a four-trading session and also ensure that irrespective of the outcome of the trading sessions, there would be profit taking and lightening of positions on Thursday, ahead of the trading holiday. Markets got a booster dose on Friday and they now have the momentum to build further on it. Expect markets to continue to move up and aim for the 35 spill over from the January highs. Targets would be about 22,750 on NIFTY and 75,600 on BSESENSEX. These are levels which become targets for the indices to reach. Markets have support at levels of 21,900 on NIFTY and at 72,100 on BSESENSEX. This becomes the operating range for the markets. 

The strategy for the week would be to continue to focus on large cap stocks and book profits in small and midcap space. There is a certain amount of index management happening with Reliance Industries and HDFC Bank being the favourite big boys. Whenever markets look weak, these stocks are pulled up to give the feeling that all is well. While talks of a correction keep on coming, the mood is optimistic, momentum favours the bulls and markets need news flow to correct. Till then ride the rally.