Markets were on a smooth course during the last week until a tsunami hit them on Wednesday. Even two trading sessions later what happened on that day remains a mystery. On that fateful day, markets made new highs with BSESENSEX touching 71,913.07 points while NIFTY touched 21,593.00 points and thereafter just gave way. They seemed to have a free fall and lost about 2.00% on an intraday basis and about 1.35% for the day. This broke the momentum of the markets and though they gained over the next two days, the optimism for the time being seems to have faded. BSESENSEX in a week which saw markets gain on three of the five trading sessions lost 376.79 points or 0.53% to close at 71,106.96 points while NIFTY lost 107.25 points or 0.50% to close at 21,349.40 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.46%, 0.52% and 0.47% respectively. BSEMIDCAP lost 0.87% while BSESMALLCAP was down 0.19%. 

The Indian Rupee lost 14 paisa or 0.17% to close at Rs 83.14 to the US Dollar. Dow Jones gained on two of the five sessions and lost on three sessions. It gained 80.81 points or 0.22% to close at 37,385.97 points.

There were three IPOs which listed during the week. The first to list was Doms Industries Limited which had issued shares at Rs 790. The share closed day one at Rs 1,330.85, a gain of 540.85 or 68.46%. In the next two days, the share lost a tad and closed at Rs 1,305.05, a gain of Rs 515.05 or 65.19%. 

The second share to list was India Shelter Finance Corporation Limited which had issued shares at Rs 493. It closed on listing day at Rs 543.50, a gain of 50.50 or 10.24%. It gained marginally to close the week at Rs 550.25, a gain of Rs 57.25 or 11.61%. 

The third share to list was Inox India Limited which had issued shares at Rs 660. It closed listing day at Rs 939.90, a gain of Rs 279.90 or 42.40%. It lost some ground to close at Rs 910.35, a gain of Rs 250.35 or 37.93%. 

The week ahead begins with a holiday on Monday for Christmas. It is almost a global holiday and most markets are closed. This would be followed by December futures expiring on Thursday the 28th of December. The current value of Dec ember futures at 21,349.40 points shows that the series gain currently is a massive 1,216.25 points or 6.04%. It’s almost impossible for the bears to fight back. They at best could eat into some of the lead and fight back. 

The market has lost its momentum for the time being. The technical indicators too are not in favour of the bulls as FPIs who were at the beginning of the month were net short, have covered them and are long. Further daily cash market purchases in December have now started to alternate between buying and selling. To add to all of this is the fact that markets are overbought. In such a scenario it is expected that markets would be in a sideways manner and would alternate between positive and negative, suffice to say that they would move in a sideways manner and remain in a broad range. The intraday highs made on Wednesday would be a resistance for the near term. 

The strategy for the week would be to buy into sharp dips and sell on rallies as the ensuing week or weeks would be a traders delight with markets moving in a similar broad zone. Trade cautiously.

Markets in the week gone by opened on a quiet note and then took a cue from the US markets and just shot through the roof. They were up sharply for the third week in a row and have now moved from just short of 66K on BSESENSEX on 24th November to 71.5 K on 15th December. The gain 5.5 K or a massive 8.33%. In the same period NIFTY has moved from 19.8 K to 21.5 K, a gain of 1.7 K or 8.58%. This is indeed a remarkable rise. Each week’s rise had different reasons. The first week which was from 27th November to 1st December was on account of the exit polls for the five state elections. The second week from 4th December to 8th December was on account of the state election results and the realisation that the ruling party in the centre would be in pole position for the general elections due in April-May24. The third week from 11th December to 15th December was primarily on news from the US that the FED would pause on the rate hikes and there could be as many as three rate cuts in the coming year. Dow had a stupendous rally post this indication. 

In India, we saw markets gain in four of the five sessions. BSESENSEX gained 1,65815 points or 2.37% to close at 71,483.75 points while NIFTY gained 487.25 points or 2.32% to close at 21,456.65 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.36%, 2.33% and 2.32% respectively. BSEMIDCAP gained 2.57% while BSESMALLCAP was up 2.38%. 

The Indian Rupee gained 38 paisa or 0.46% to close at Rs 83 to the US Dollar. This was a sharp gain and probably the best during the calendar year 2023. Dow Jones had a spectacular week and is now trading at the best levels achieved during calendar year 2023. Dow gained on all five trading days of the week and was up 1,057.29 points or 2.92% to close at 37,305.16 points. On a year-to-date basis, Dow is up 12.54% for the year. This is a far better performance than what was witnessed last year when Dow had negative returns of 8.78%.

One important factor which needs to be considered is timing. Markets made a short term bottom the day FPIs sold aggressively. On 26th of October their net sale in the cash market was Rs 7,700 crs and during the entire month it was negative Rs 29,000 crs. On Friday the 15th of December, FPIs bought equity worth Rs 9,239 crs and so far in December they have bought equity worth Rs 29,733 crs. Similarity is uncanny and does give some cause for taking notice and exercising caution. Probably its time to expect some profit taking, some pull back action and correction at higher levels after a fantastic run over the last three weeks. 

The present run in IPOs is unabated. You now have more than one IPO opening every day of the week and things could not be tighter. In the coming week we see the issue from Muthoot Microfin Limited is tapping the capital markets with its fresh issue of Rs 760 crs and an offer for sale of Rs 200 crs. The price band is Rs 277-291. The issue would be opening on Monday the 18th of December and closing on Wednesday the 20th of December. The company as the name suggests is into the business of microfinance. In terms of financials, the company reported revenues of Rs 1,446.34 crs for the year ended March 23 and Rs 1,047.23 crs for the half year ended September 23. The Profit after tax was Rs 163.88 crs for the year and Rs 205.25 crs for the half year. The EPS was Rs 14.19 for the year and Rs 11.66 on a fully diluted basis. For the half year the diluted EPS was Rs 14.22. The PE band for the full year earnings is 23.76-24.96. The range for the industry is 9.33 at the lowest and 551.18 at the highest. In the peer group, five of the seven are below the PE band of Muthoot while only two are more expensive. A better yardstick for the financial performance to be evaluated is the price to book. Here the price to book for Muthoot is at 2.58 based on September 23 NAV. The peer set again sees five out of seven peers having a lower price to book to Muthoot. 

The share looks expensively priced but as per the flavour of the day there are listing gains to be made. Apply for immediate short-term gains as a strategy. 

The second issue to open is from Suraj Estate Developers Limited which is tapping the markets with its fresh issue of Rs 400 crs in a price band of Rs 340-360. The issue is opening on Monday the 18th of December and closing on Wednesday the 20th of December. The company has a focus area of operation in the South-Central region of Mumbai covering Mahim, Matunga, Dadar, Prabhadevi and Parel areas. The company has expertise in redevelopment of tenanted properties under regulation 33(7) of the Development Control and Promotion regulation in the Mumbai region. 

As on 30th June 23, the company has 13 ongoing projects with 20.34 lac square feet developable area and saleable carpet area of 6.09 lac square feet. It also has 16 upcoming projects with an estimated carpet area of 7.44 lac square feet. 

The company also has 216 flats unsold from various projects which form a substantial part of inventory on books. The business is attractive and does not involve land banks as redevelopment projects are joint development and therefore asset light. Going forward the company has huge opportunities to scale the business with working capital which will get freed up. 

The PE multiple of the share is 33.66-35.64 based on fully diluted earnings for the year ended March 23. The NAV is Rs 27.12 as at 30th June and would improve to Rs 109.58 post the completion of the offer. The share offers value to an investor with a medium to long-term investing horizon. 

The other issues tapping the markets in the coming week include Happy Forgings Limited, Credo Brands Limited, Motisons Limited and RBZ Jewellers Limited. 

Coming to the markets, technically speaking markets are looking overbought and need to consolidate before any further up move. The strategy for the week would be to book short term profits and allow the markets to cool-off. The fact that IT stocks which were so far a laggard have also moved sharply, give you the feeling that sector rotation is almost done. Probably FMCG is still pending and may happen while the rest of the markets correct. The upside could be 200-250 points on NIFTY while the downside is a good 500-600 points on NIFTY. Trade cautiously.