The markets had four trading sessions last week and each day played out differently. We had a up day, a down day, a sideways positive day and a sideways negative day. The net effect was the BSESENSEX losing 54.32 points or 0.16% to close at 34,915.78 points. NIFTY lost 74.05 points or 0.70% to close at 10,618.25 points. FII’s continue to be bearish while domestic are the bulls on the street. So far sharp rallies are the outcome of short covering and we are yet to see large delivery-based buying happening.
Dow Jones lost 200.43 points or 0.83% to close at 24,262.51 points. The Indian Rupee was under pressure and lost 74 paisa or 1.11% to close at Rs 66.86 to the US Dollar.
The dry spell in the primary markets seems to have come to an end. The first issue in the financial year 2018-2019 is opening on Wednesday the 9th of May and closing on Friday the 11th of May. The issue is from Indostar Capital Finance Limited promoted by Everstone. The company is raising Rs 700 crs of fresh capital and through an offer for sale selling 2 cr shares. The price band is Rs 570-572. The company has an EPS of Rs 26.09 for the year ended March 2017 on a diluted basis and of Rs 19.46 for the nine-month period ended December 2017. The price earnings multiple based on the results of year ended March 2017 is in a band of 21.66-21.74 points. Compared to the peers the valuations look reasonable and does offer scope for appreciation in the medium term. The other key driver for this company is the fact that it is being driven by Mr Sridhar who earlier was at the helm of affairs of Shriram Transport. The two business verticals which have been added at Indostar are the commercial vehicles and affordable housing loan segments. These verticals have been added just recently after Mr Sridhar joined the company in 2017. The company has opened the relevant offices and hired the teams to service these segments. With the infrastructure now in place, the verticals can take off and there can be huge growth in these segments where there is virtually no base. The share looks decently priced and would set in motion the primary market for the coming quarter.
PC Jewellers is a North India based jewellery company having outlets on a pan-India basis. The company has been in the thick of controversy over the last four months. The share price had touched a high of Rs 600.65 on the 16th of January 2018 and touched a low of Rs 95.05 on Thursday the 3rd of May 2018. It bounced quite sharply the very next day to Rs 174.55 as of Friday’s close. The company had called a board meeting on the 25th of May for purpose of results and also to consider the buyback of shares. The meeting for just the buyback of shares has been preponed to be held on the 10th of May. The volumes on this counter are huge and defy all logic. Incidentally the share is in ban mode in futures. The company has been in controversy after another listed player, Vakrangee Limited invested in the equity of PC Jeweller. It has been alleged that the promoter group member has been gifting small quantities of shares to relatives who have then been selling them in the market. Share prices of Vakrangee have been on a downswing and locked at lower circuit on a daily basis. Vakrangee for the week lost Rs 19.40 or 18.45% to close at Rs 85.75. What is the connection between Vakrangee and PC Jewellers would be known only to the two promoters, but what is happening in the market is pure wealth destruction.
Incidentally Vakrangee too had announced a meeting for the buyback of shares but has yet to announce the price or the terms of the buyback. What would happen to PC Jeweller from here is anybody’s guess but very clearly the share is not for the faint hearted.
Karnataka goes to polls on Saturday the 12th of May, with the results being declared on Tuesday the 15th of May. As of now the market is yet to back the expected outcome but would do so in the coming couple of days. This would lead to sharp volatility between now and the declaration of results, providing trading opportunities. Use sharp dips to buy into the market and similarly strong rallies to sell. Markets are in a trading range currently and need lot of news flow to break out of this range.
