Markets began the week with losses on Monday and had a very strong showing on Tuesday. Thereafter on each day they opened with an upward gap, slipped into negative territory and managed to close flat with minor gains. BSESENSEX gained 376.77 points or 1.05% to close at 36,386.61 points. NIFTY was up 112 points or 1.04% to close at 10,906.95 points.
The Indian Rupee lost 69 paisa or 0.98% to close at Rs 71.18 to the US dollar. Dow Jones gained 710.40 points or 2.96% to close at 24,706.35 points. The US government shut down continues and with Trump behaving in a manner as most describe as unbecoming of a President, it looks like a longer shutdown than what one would expect.
In the newsletter last week there was an error made in the ratio of Bandhan Bank and Gruh Finance which is deeply regretted. The swap ratio is 1000 shares of Gruh Finance would fetch 568 shares of Bandhan Bank. Prices of both shares fell during the week. Gruh Finance is down to Rs 233.20 while Bandhan Bank is at Rs 440.50. The new price for conversion of Gruh to Bandhan therefore becomes Rs 410. This will ensure price pressure on Bandhan Bank.
There was plenty of action in the market in individual stocks based on news flow. Result season continues and the larger companies seem to be declaring better results than what were reported in the year ago quarter and the previous quarter.
After TCS and Infosys, it was the turn of Wipro to declare a good set of numbers. The share gained post results. Other big companies to declare results were Reliance Industries and Hindustan Unilever. Shares of Reliance gained quite sharply and were up Rs 85 or 7.74% at Rs 1,183.
SEBI has advised Larsen and Toubro that its buyback offer is not in compliance with section 68(2)(d) in terms of the net debt and has therefore advised the company not to proceed with the buyback offer. This would put pressure on the share when trading begins on Monday. Shares of the company lost Rs 52 or 3.80% during the week and closed at Rs 1,318. The share price was Rs 1,240 in August 2018 when the company first announced the buyback. In normal circumstances, while the share would be under pressure when trading begins on Monday, it should not fall below the price from where it all started at Rs 1,240.
There is no clarity on whether this is based on stand-alone balance sheet or consolidated balance sheet. SEBI has certainly looked at consolidated balance sheet and this is considering a large institution like IL&FS running into financial difficulties. At rough cut the equity and reserves are at roughly 56,300 crs and consolidated debt around 1.30 lakh crs. The bulk of this debt is for L&T Finance which is an NBFC. Further to compound matters the sale which was done to Schneider of the Electrical and Automation Division has yet to be consummated. The sale was for about Rs 14,000 crs.
Sun Pharma has been in the news for all the wrong reasons in the last few quarters. This time around the media whether print or electronic is talking about a second letter from the whistle-blower. The company has written to SEBI and asked them to investigate the matter. Meanwhile the shares of Sun Pharma were on the receiving end and lost significant ground. Shares were down Rs 52.45 or 11.83% at Rs 390.75. One wonders whether there is more than meets the eye. A website having the full letter of the complaint while the company denies having received nothing either from the whistle-blower or the regulator seems odd. Further market reacted to news after a couple of days which is indeed surprising. For the better of the market and shareholders, one hopes the regulator gets to the bottom of this issue and at the earliest possible.
Markets have slowly but steadily gained in the last week and will continue to do so in the coming week as well. With investors believing that there is no positivity and they are willing to short at every opportunity; this movement will continue. Buy dips and sell on rallies.
