The week gone by saw markets under a lot of pressure and they simply capitulated on Friday in the last hour. There was fear in the markets and one saw covid-19 written all over. The situation was no different globally and every market saw prices reacting sharply. BSESENSEX lost 2,872.83 points or 6.98% to close at 38,297.29 points while NIFTY was down 879.10 points or 11,201.75 points. The broader markets saw BSE100, BSE200 and BSE500 lose 7.40%, 7.36% and 7.35% respectively. BSEMIDCAP lost 6.97% while BSESMALLCAP lost 7.04%.
None of the frontline indices managed to close in the black. The one to lose the least was BSEFMCG 4.63 %. Similar was the case in individual stocks where Asian Paints fell just 2.44%. The biggest fall in indices was BSEMETAL down 14.47% and in stocks Vedanta down 19.89%.
The Indian Rupee lost 57 paisa or 0.80% to close at Rs 72.22 to the US Dollar. Dow Jones was very badly hit and lost a massive 3,583.05 points or 12.36% to close at 25,409.36 points. The Dow suffered losses of 1,032 points, 879 points, 124 points, 1,191 points and 357 points during the course of this week. While the weekly losses were almost 3,600 points, the loss from the high made on 12th February is about 4,200 points or over 14% and under Dow parlance would indicate that it is in a bear market as losses are more than 10% from the top.
It’s not just covid-19 which has hit the sentiment but it is the fear of disruption in the supply chain post the virus getting over which is alarming people. The whole world seems to be importing from China either products or components or both, and currently China is in a state of lock down.
While this could be an opportunity for make in India, readers would recall that the government had sometime in August-September 2019 allowed 100% FDI in contract manufacturing and also lowered the tax rates for new units set up to 15%. This was allowed for a block of four years for units to be set up till March 2023-2024. India needs to exploit this condition and maximise investment through this window and capitalise on the opportunity available. This could be once in a lifetime one.
February futures expired on a weak note and were down 402.50 points or 3.34% to close at 11,633.30 points. All the losses were in this week as the series was up 45 points when the week began.
In the last many months, many brokers have been declared as defaulters on the exchanges particularly NSE. One such broker was declared in the last week as well. One wonders whether using the same yardstick, why no action has been taken as yet against Karvy who fraudulently removed client shares from their demat accounts and borrowed money against them. Why is the exchange giving him extension after extension to return the shares? Is this not setting a bad example of allowing time to a fraudster?
There is plenty of action in the primary market with SBI Cards and Payment Services Limited tapping the markets with a fresh issue of Rs 500 crs and an offer for sale of 13.05 cr shares in a price band of Rs 750-755. The company on Friday allotted 3.66 cr shares to 74 anchor investors which include 12 mutual funds through 48 schemes. The highest allocation was to HDFC Mutual fund who was given 20.53 lac shares or 5.60%. Roughly 40% of the allocation is to the top seven entities.
The issue opens on Monday the 2nd of March and closes on Wednesday the 4th of March for QIB’s and on Thursday the 5th of March for HNI’s, Retail, Shareholders and Employees. The grey market premium has been very volatile and has fluctuated between Rs 250-375 and is currently at the lower end of the band. Last evening the premium had momentarily crashed and hit Rs 200 but since recovered. This has shaken out many new investors in the leveraged HNI category and also softened the demand of interest rates by HNI. In either case it augurs well for the prospects of the issue.
Interest for the leveraged HNI has moved up quite sharply and is in the 13-15% range for 9 days. The last big issue, Ujjivan Small finance Bank saw interest rates of around 8-8.5%. SBI Card as the name suggests is in the business of selling credit cards which are their own and also co-branded. The unique thing about them is that all their cards are sold/issued against payment and there are no free cards unlike many of their competitors.
The price earnings multiple based on year ended March 2019 is Rs 80.06 at the upper band but would change considerably at the end of the year when results are declared for March 2020. The driving factor for the company is the growth in consumer spending, rising disposable income amongst the younger generation and above all digitising of the economy. The company has excellent prospects and considering that it has the first mover advantage and is a pure play card company is poised to grow rapidly in the coming years. Further being the first issue in the sector would become a benchmark for further issues in the sector.
There is a second issue which is opening on Wednesday the 4th of March and closes on Friday the 6th of March. The issue is from Anthony Waste Handling Cell Limited. The price band is Rs 295-300. The issue consists of a fresh issue of Rs 35 crs and an offer for sale of 57 lacs shares. The company is into the business of collection, transportation and treatment of municipal solid waste management services. These contracts are of two types where there is a collection and transportation contract valid for 5-9 years and a processing contract valid for 20-25 years. Both contracts have different conditions as the former is not capex heavy while the latter involves setting up of plant and machinery. Based on March 2019 results the company had earned a diluted EPS of Rs 12.35 while in the six months ended September 2019, the same has improved to Rs 11.30 (non-annualised). Clearly the company is in the business of creating wealth from waste.
Coming to the week ahead, it appears after the capitulation in the markets we are set for a period of recovery followed by consolidation. While there could be an immediate sharp rebound there would be periods of volatility where markets would move in both directions. With a sharp 2,800-point fall on the BSESENSEX and almost 900 point on NIFTY, we have a long way before we have recovered from the fall.
Buy on dips and allow markets to recover as there is now deep value in the market covid-19 notwithstanding.
