Markets to Trade with a Positive Bias

Markets behaved during the week gone by on expected lines. It was volatile and choppy and we saw gains on Monday and Friday. The remaining three days in between were days of correction with a mini selloff on Thursday. At the end of the week, BSESENSEX gained 619.07 points or 1.03% to close at 60,686.69 points while NIFTY gained 185.95 points or 1.04% to close at 18,102.75 points. The broader indices like the BSE100, BSE200 and BSE500 saw them gain 1.26%, 1.32% and 1.33% respectively. BSEMIDCAP gained 1.45% and BSESMALLCAP gained 1.15% respectively.

The Indian Rupee was fairly range bound and gained 2 paisa or 0.03% to close at Rs 74.44 to the US Dollar. Dow Jones opened with a bang and made new lifetime highs on an intraday basis and closing basis on Monday and then slipped to close with losses of 227.64 points or 0.63% at 36,100.31 points. The intraday high was 36,566 points while the closing high was 36,432.22 points.

In news during the week, RBI and the government held discussions about crypto currency and have decided to bring legislation about it in the coming Winter session of parliament.

The microfinance sector was in the news with two listed entities in the forefront. The first was the scathing letter written by the recently resigned Managing Director of Spandana Sphoorty Limited, Mrs Padmaja Gangireddy against the alleged wrong doings in the company by the largest shareholder who is a Private Equity Investor. This letter has been widely circulated and has found its way to RBI as well. The second bank in the news was the subsidiary of Indus Ind Bank, Bharat Inclusion where a whistle blower complaint has been doing the rounds about evergreening of accounts. Shares of Indus Ind bank have fallen by Rs 152 or 12.74% during the week to Rs 1,189. Spandana Sphoorty shares were also under pressure.

What makes the plot interesting, is the fact that Spandana is to appoint a new Managing Director and CEO post the resignation, and the person being talked about is the person who is named in the whistle blower complaint. The matter is becoming interesting and will be keenly watched.

In primary markets, there were three issues which were open for subscription and closed during the week. Further, two issues listed during the week as well. In the week ahead there would be two issues opening for subscription, and Monday would see three issues list on the bourses followed by Paytm listing on Thursday.

The issue from Paytm which is India’s largest fundraiser ever with an issue size of Rs 18,300 crs received a tepid response and was subscribed 1.95 times. The QIB portion was subscribed 2.88 times, HNI portion remained undersubscribed at a mere 0.25 times and Retail was subscribed 1.72 times. There were 14.40 lac applications and this number is disappointing as the retail portion has seen applications in the 35-39 lac number in recent issues which have done well.

The issue from Sapphire Foods Limited was subscribed 6.45 times overall with QIB portion subscribed 7.5 times, HNI portion subscribed 3.46 times, Retail portion was subscribed 7.76 times. There were 9.87 lac applications in all. The issue received response which was lower than expectations considering that in August when a similar issue from Devyani International was subscribed 116 times. Incidentally both Sapphire Foods and Devyani International are franchisees for Yum Foods who sell KFC and Pizza Hut.

The final issue was from Latent View Analytics Limited which was subscribed 338.51 times and created a new record for being the highest subscribed issue. The company which had tapped the capital markets with its issue to raise Rs 600 crs raised Rs 1.13 lac crs. The QIB portion was subscribed 150.8 times, HNI portion was subscribed 881.96 times and Retail portion was subscribed 123.83 times and Employee portion was subscribed 4.03 times. There were 37.61 lac applications and on basis of lots the retail portion was subscribed 94.91 times.

The first issue to list was from FSN E-commerce Ventures Limited, the owners of the brand Nykaa. The company had a blockbuster listing with shares gaining over 96% on day one. Shares which were issued at Rs 1,125 closed day one at Rs 2,206.70, a gain of Rs 1,081.70 or 96.15%.

The second issue to list was Fino Payments Bank Limited which closed day one with losses of Rs 31.75 or 5.50% at Rs 545.25. The issue price was Rs 577.

The week ahead would see three listings on Monday the 15th of November. They are PB Fintech, SJS Enterprises and Sigachi Industries Limited. Shares of Paytm the brand which is owned by One 97 Communications Limited would list on Thursday the 18th of November. There is no buzz about this issue and fortunately or unfortunately there is no grey market buzz as well. There are no leveraged HNI’s who have applied for the issue. Without support from QIB’s this issue could be a sitting duck for disaster on listing day. What could be done to save the day for the company is that collectively QIB’s buy for delivery a minimum of 2 cr shares on listing day, as per market sources.

The first issue opening for subscription in the coming week is from Tarsons Limited which is tapping the markets with its fresh issue for Rs 150 crs and an offer for sale of 1.32 cr shares in a price band of Rs 635-662. The EPS for the year ended March 2021 was Rs 13.43 and the PE multiple is a steep 47.28-49.29 times its March 2021 earnings. The company is in the business of manufacturing and supplying plastic labware used by diagnostic companies, pharma companies and research institutions. A good comparable for the company in the listed space is Poly Medicure Limited. The current market mood would ensure that the issue is well received but the proof of the pudding would be post-listing and its subsequent sustainability of prices.

On the vaccination front, a total of 112.38 cr vaccinations have been done with 75.30 cr having received the first vaccination and 37.07 cr having received both vaccinations.

The week ahead has an extended weekend with Friday being a holiday. Markets saw reasonably sharp gains on Monday followed by correction and some sort of a sell-off on Thursday before rebounding on Friday. Dow Jones though negative for the week, saw markets gaining on Friday. Markets in the coming week would see volatility and two-sided movements. Use sharp dips to buy large cap stocks and rallies to sell. While an immediate short-term bottom may have been made, we have quite a few resistances at close levels which could cause sharp corrections as well. Spate of new issues and their listing would impact market sentiments. Finally, FPI’s net selling if it continues could affect markets.

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