It was a volatile and choppy week at the bourses last week with markets gaining on two of the five trading days. A very strong showing on the last day of the week which also happened to be the first trading day of the new series saw markets end in the green. BSESENSEX gained 131.39 points or 0.38% to close at 34,124.15 points. NIFTY gained 38.75 points 0.37% to close at 10,491.05 points. The markets are still between 6.5% and 6.75% of their 29th January highs and are trying to find their base.
February futures ended on a weak note and the series lost 686.95 points or 6.62% to close at 10,382.70 points. Dow Jones too had a weak period and lost 256.90 points or 1.03% to close at 24,962.18 points.
The ongoing scam involving PNB and Nirav Modi has had its repercussions on the banking and gems and jewellery industry. While bankers have become averse to lending and are becoming strict in paperwork, the gem and jewellery industry which is highly working capital intensive is bearing the brunt after earlier scams of Winsome Diamonds and Ganesh Jewellery. Share price of PNB saw a weekly loss of Rs 12.25 or 9.75% to close at Rs 113.80. Gitanjali Gems lost Rs 12.75 or 33.95% to close at Rs 24.80. 90% of the people in the diamond trade are a close knit of people from Palanpur. Another way of looking at it is that diamonds as an industry involves high stakes. If a scam were to happen it would be from the majority community.
The unfortunate part is the timing. We seem to have one scam after another unearthing. Nirav Modi and Mehul Choksi, pen maker Rotomac, another Delhi jeweller who is absconding for over a couple of years. The stock price movement of yet another company Vakrangee is quite baffling. The price has fallen from Rs 515.40 on the 24th of January to Rs 190 at close of trading on Friday. The company gave full page cover ads in leading newspapers talking about the business. It also announced that it would buy back shares allocating Rs 1,000 crs and distribute Rs 250 crs by way of dividend. The promoter would not participate in the buyback. This was on the 12th of February. The share recovered temporarily to Rs 257.70 but is back to its original trend. The company needs to explain its revenues.
SEBI has through a circular removed the misconception of the SME exchanges about listing day which would affect subscription levels of SME issues going forward. On the main board, if an issue was of a value or size of less than Rs 250 crs, the company would list on the trade to trade segment, and would have a 5% price band for the next ten trading days. There would be a price discovery mechanism as well. Currently on the SME the issue price was the discovered price and they were traded at a 20% circuit with no trade to trade. This saw huge subscription and oversubscription on the SME segment. The exit route was on the third day when prices could be up about 60% to 72%. With this clarification and the last issue to list on BSE SME platform following these guidelines, this kind of subscription seen hitherto would be a thing of the past. This would be a body blow to the so-called market operators in the SME segment.
The IPO from Aster DM would be listing on Monday the 26th of February. The company had through a simultaneous fresh issue of Rs 725 crs and offer for sale of 1.34 cr shares in a price band of Rs 180-190 tapped the markets. The issue was subscribed 1.31 times.
In primary market news we have an IPO opening on Monday from H G Infra Engineering Limited. The company is tapping the capital markets with its simultaneous fresh issue of Rs 300 crs and an offer for sale of Rs 300 crs in a price band of Rs 263-270. The issue closes on Wednesday the 28th of February. The shares are valued at a price earnings multiple of between 26.65 to 27.36 times based on consolidated EPS of Rs 9.87 for the year ended March 2017.
Though the pipeline of IPO’s is very strong, promoters and merchant bankers have become wary of approaching the markets. They are all waiting for someone to be brave and see the response before venturing. Hopefully this would bring about better pricing.
Markets are volatile and need to find a new base before any meaningful rally begins. Bide your time and pick ad choose stocks where one is comfortable. Opportunities galore abound.
