It was a very quiet week at the bourses and the trading range of the markets seem to be reducing. However, movement continues to remain in negative territory with FPIs remaining sellers. There is a complete disconnect between valuations in the large cap space which are quite attractive from a medium term investment horizon and the midcap and small cap space which continue to remain more than rich. Yet, retail investors are attracted towards the latter. Primary markets continue to dominate markets and last week saw as many as six new mainboard listings including the much awaited NSE Limited. It’s a big fallacy that investors crib about the valuations in the secondary markets but pay much more when the issue taps the capital market. Wonder why.

Markets gained on three of the five trading sessions and lost on two. BSESENSEX lost 678.13 points or 0.91% to close at 73,881.44 points while NIFTY lost 218.30 points or 0.94% to close at 23,128.10 points. BANKNIFTY lost 778.30 points or 1.38% to close at 55,580.40 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.77%, 0.79% and 0.76% respectively. BSEMIDCAP lost 0.63% while BSESMALLCAP gained 1.50%.

The Indian Rupee remained unchanged at Rs 95.98 to the US Dollar. Dow Jones gained 145.98 points or 0.28% to close at 51,828.62 points. Dow Jones gained on two of the five trading sessions and lost on three. The US goes to vote on the 3rd of November and the belief on the ground in the USA is that Trump would be on the receiving end. His call that he would give 5000 $ to every American who voted for the Republicans is a telling statement. We all know what freebies has done to the elections in India. Imagine what would happen if the same is adopted as standard practice in the USA. I get goose bumps and sleepless nights. Five weeks to the countdown.

There were six listings on the bourses last week. The center of attraction remained NSE Limited which had issued shares at Rs 1,785. The share debuted on Thursday the 24th of September at Rs 1,800 and made a high of Rs 1,878 before closing at Rs 1,818, a gain of Rs 33 or 1.85%. On Friday, the share lost ground and closed at Rs 1,792.65, a gain of Rs 7.65 or 0.43%. The performance could at best be termed as muted and it would be interesting to see how investors react if the share slips below the issue price of Rs 1,785.

The other five listings were from Sona Selection, SS Retail, Jindal Supreme, Hero Motors Limited and Manika Plastech Limited. The outstanding performance was from SS Retail which gained 71.54% while Hero Motors gained 68.87%.
There is a three day bank strike beginning from Monday the 28th of September and ending on Wednesday the 30th of September. One is not sure what would be the fate of issues which are closing during the period. I believe it would be business as usual and SEBI would allow companies to take their own call for extension. Stock exchanges are functioning and online applications are the order of the day. If anyone wishes to extend it would have to be as per SEBI regulations where the price band is to be lowered and then extended.

The week ahead sees September futures expire on Tuesday the 29th of September. The current value of NIFTY futures at 23,128.10 points is very heavily tilted in favor of bears who have a lead of a massive 1,131.95 points or 4.67%. With two days to go, there is no way that they can recover. At best there could be some partial recovery if things improve. Two points that could help the bears are enumerated. Oil continues to trade around 102-103$. However, currently Saudi Arabia is shipping close to 6 million barrels per day, a level which they were doing before the Iran-USA war broke out. This shows things are streamlining and will continue to improve, until Trump does the contrary. Secondly, we are coming to the end of Quarter two (July-September) and markets would look at results in another 10 days. With things remaining largely steady during the period, results could provide some ray of hope. A data point to add would be that the lows on the BSESENSEX and NIFTY were made on Friday while the highs were made on Tuesday.
Markets would continue to wait for geo political news flow to drive them. The lack of them could actually be positive news. Support for the NIFTY exists in the range of 22,650-23,800 points while resistance is at levels of around 23,650-23,800 points.

The strategy would be to look at sharp dips to enter the large cap space and use sharp rallies to exit what you would have purchased recently. In short, it’s a trading market with an eye on portfolio building for the coming two years.

Trade cautiously.

It was a short week but tough one. Markets gained on three of the four sessions and lost on one. Yet markets ended in the negative simply because the fall on Tuesday was deep. BSESENSEX lost 354.49 points or 0.47% to close at 74,559.37 points while NIFTY lost 88.70 points or 0.38% to close at 23,346.40 points. BANKNIFTY lost 247.85 points or 0.44% to close at 56,385.70 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.57%, 0.47% and 0.41 % respectively. BSEMIDCAP was down 1.82% while BSESMALL lost 2.21%. The highs of the week were made on Tuesday and the lows were made on Wednesday. The levels were at 75,436.44 points and 73,981.33 points on BSESENSEX and at 23,592.85 points and 23,116.10 points on NIFTY. What is important to note that though markets were under pressure, they did not break key support levels and they have become fairly range bound with a 1500 point movement on BSESENSEX and about 470 points on NIFTY.   

The Indian Rupee lost 42 paisa or 0.44% to close at Rs 95.98 to the US Dollar. Dow Jones lost on four of the five trading sessions and gained on one. It lost 890.65 points or 1.69% to close at 51,682.64 points. The US FED has raised interest rates to a band of 3.75%-4% at its review meeting.  From the minutes of the meeting it appears that there would be one more rate hike at least, considering the steep rise in inflation in the US. It is heartening to note that the new chief of the US Fed has done the natural thing and not listened to the dictate of US President that rates be lowered. 

Looking at what is happening across governments and central banks, expect India to raise rates in its next meeting to be held in October. Inflation is becoming a cause of concern and with the US –Iran war unlikely to end in a jiffy, and oil at 105$ plus, is a global cause of concern. In a couple of months we will start talking of winter setting in, adding to the demand of oil. All of this points to the US mid-term elections due in November and the possibility of Trump not doing well in them. This could lead to global pressure all over again. 

The primary market juggernaut continues unabated. The mother of all issues, NSE Limited is currently open and at the end of 2 days is subscribed. The issue is subscribed 1.16 times with the issue closing on Monday the 21st of September. Currently the Retail portion is subscribed 0.72 times and offers subscribers an opportunity to acquire shares of a proxy play on the Indian economy. NSE has grown at a faster pace than the GDP consistently and with Indian GDP growth expected to continue to grow around 7-8%, this becomes an attractive play. 

There is yet another interesting company tapping the markets in the next week. Elevate Campuses Limited is launching its IPO for Rs 2,100 crores in a price band of Rs 343-362. The issue would open on Wednesday the 23rd of September and close on Friday the 25th of September. The company owns, operates and manages on-campus student accommodation across higher education institutions and also owns K-12 assets. 

The company reported revenues of Rs 401.8 crores in India and Rs 166.8 crores outside India. On a pro-forma basis, the EPS on a fully diluted basis was Rs 13.14. The PE at the cap price is 27.5. The objects of the entirely fresh issue is to buy the school assets from the group companies for Rs 1,100 crores and repayment of debt of Rs 750 crores. It’s an interesting business and merits attention whether from the IPO subscription basis or post listing. 

Markets have held on to 23,000 level last week. Support continues to hover around 22,800 points and lower at 22,500 points. On the upside we have very strong resistance at 23,800 points and markets will have to do something spectacular to break the same. 

The strategy, would be to continue to trade in the market place, buying on sharp dips and selling on rallies. A traders market at best. Hopefully the primary market pressure would end after next week for sure. 

Trade cautiously.