A volatile week coupled with political drama was the highlight of trading in the week gone by. The markets were virtually flat with the BSESENSEX losing a mere 45.26 points or 0.12% to close at 36,496.37 points. NIFTY lost 8.70 points or 0.08% to close at 11,010.20 points. The broader markets saw the BSE100, BSE200 and BSE500 lose 0.30%, 0.36% and 0.62% respectively. BSEMIDCAP lost 1.55% and BSESMALLCAP lost 3.02%.
Friday saw the TDP sponsored and supported by opposition parties, debated and voted upon. It provided nation wide drama and an opportunity to electronic and digital media to have large number of eyeballs. The outcome was on expected lines with the motion being defeated. It did however throw up new combinations and permutations which could play out in the general elections next year.
The offer for sale from TCNS Clothing Co. Limited was subscribed 5.27 times with the QIB portion subscribed 13.47 times, HNI portion subscribed 5.08 times and Retail portion undersubscribed 0.67 times. The company is into the retailing of women’s apparel under its three brands, W, Aurelia and Wishful.
There is another IPO this week from HDFC which is offering for sale 2.54 cr shares in its asset management company, HDFC Asset Management Company Limited. The price band is Rs 1095-1100. The issue opens on Wednesday the 25th of July and closes on Friday the 27th of July. The company has an AUM (assets under management) of Rs 2.92 lakh crs of which 51% is equity and 49% is non-equity. The company had a net profit of Rs 721.62 crs and therefore an EPS of Rs 34.96. The offer for sale at the top end of the band is at 31.46 times, its EPS, which is significantly higher than that of Reliance Nippon Life Asset Management, which is the only other listed player in the space. The brand HDFC has a better acceptance and that could probably explain the rationale for the higher pricing.
Investors in the issue are probably lucky that the pricing has been kept at these multiples, as the market expectation was for even higher valuations. The company had allotted shares at Rs 1050 to its distributors, which was struck down by SEBI. The company was then asked to buyback these shares and pay interest to the applicants. The company chose instead to buy back the shares through KKR at the issue price of Rs 1050 along with an interest component of 12% per annum which amounted to Rs 25 per share. As these shares would be under lock-in, this effectively became a price discovery and hence the extremely narrow price band.
The week ahead sees July futures expire on Thursday the 26th of July. The current value of NIFTY at 11,010.20 is higher by 421.10 points or 3.82%. With four trading sessions to go for expiry, bulls have the upper hand and they are likely to take the series as well. Post expiry, there would be another three days of trading in July to ensure the 11-year track record of markets rising in July to hold good.
Markets would be choppy and there would not be smooth sailing for either bulls or bears. On a year to date basis the BSESENSEX is up 6.68%, while NIFTY is up 4.36%. BSEMIDCAP is down 17.28% and BSESMALLCAP 22.32%. The markets seem to be on track for allowing history to repeat itself as far as the July phenomena is concerned. It also appears that the mid and small cap segments are at around their lows and should move up. The only question is how quickly? Any sharp movement is not good, and it should be a slow and measured up move as the pain on the downside has been tremendous.
