Diwali had come early to Dalal Street and the FM ensured that even post Diwali there were fireworks on D Street. The announcement about recapitalisation of banks did exactly that, Markets went crazy and one saw traded volumes in banking stocks hit the roof. They were also accompanied with large deliveries. Just to talk of a few State Bank of India saw volumes of 28 cr shares and 14 cr shares changed hands. In the case of Bank of Baroda trading was 15.5 cr shares and delivery 8 cr shares. This kind of volume is unheard of and not seen before.
The market place is dominated by news and action from the primary market. While our SENSEX and NIFTY trade at 24-25 times and are termed as expensive, almost every IPO hitting the market is valued at 43-50 times and gets lapped up. Not only does the issue get lapped up there is a premium and on listing the share quotes at a premium of about 25%. I am sure I am missing a lot and the market knows much more that I know. Would certainly love if some person or persons are willing to explain the rationale of why 25 is expensive but 43-50 is not.
There are three IPO’s opening during the week. The first issue is Mahindra Logistics Limited which opens on Tuesday the 31st of October and closes on Thursday the 2nd of November. The price band is Rs 425-429 and the company is looking to raise Rs 828.83 crs at the top end of the band.
The second issue is from New India Assurance Company Limited which is tapping the markets with its issue to open on Wednesday the 1st November and close on Friday the 3rd of November. The price band is Rs 770-800 with a discount of Rs 30 to retail investors and employees. The company would raise Rs 9,600 crs at the top end of the band. Considering the poor listing of GIC RE this company woud have to make extra effort to market itself.
The third issue is from the footwear brand based out of Kolkata, Khadim’s. The company is looking to raise Rs 543 crs in a price band of Rs 745-750. The issue opens on Friday the 3rd of November and closes on Tuesday the 6th of November.
There was one issue which raised money in the primary market. The IPO from India’s first AMC (Asset management company) went public last week and was oversubscribed 81.54 times. Reliance Nippon Life Asset saw its QIB portion subscribed 118.40 times, HNI 209.44 times and Retail 5.65 times.
Two issues listed during the week. The first was IEX Limited the power exchange which had a controversy about subscription by FPI’s in the issue. The allocation made to anchor investors was cancelled and added back to the QIB portion. The listing was lukewarm. It closed day one with losses of 1.4% and by weekly close on Friday was down 5.22%. Shares were allotted at Rs 1,650.
The second issue to list was the mega issue from GIC RE the PSU. Shares were allotted at Rs 912 with a discount of Rs 45 for retail investors. They listed at Rs 850, made a low of Rs 780 and then after a slow gradual climb to Rs 820, did the sprint in the last 45 mins to make the high of Rs 898. The weighted average close was Rs 874, above the retail allocation price. The weighted average of the day was about Rs 844. A mega issue which investors have probably not understood.
Markets are on a roll and there seems to be no stopping them. While logic is not working, the inevitable correction is overdue as fundamentals do not justify current valuations. It makes current sense to stay light and allow markets to ride themselves out.
