After the sharp gains witnessed in the previous week, markets were circumspect this time around, but continued to post gains. Markets are at lifetime highs, and in the previous week one saw the market breadth gaining substantially. One reason for the above could be the fact that key portfolios of the cabinet have been retained by the ruling party and there is no significant change in ministers. This implies continuity. Probably that explains why the markets rallied and one saw such huge momentum. Market believes that the policies and thinking of the government in Modi 3.0, would be on similar lines as in the previous stint, even though this is a coalition government.
Sensex gained on three of the five trading sessions and lost on two, while NIFTY gained on four sessions and lost on one session. BSESENSEX gained 299.41 points or 0.39% to close at 76,992.77 points while NIFTY gained 175.45 points or 0.75% to close at 23,465.60 points. The broader indices like BSE100, BSE200 and BSE500 gained 1.29%, 1.68% and 2.02%. BSEMIDCAP gained 4.41% while BSESMALLCAP was up 5.07%. In the benchmark indices one is seeing a churning of heavyweight stocks. In the previous week the top gainers were FMCG and IT stocks. This week they were under pressure and we saw cement shares rallying. I believe this rotation will continue till the announcement of budget and the onset of Quarter one results for the April to June Quarter. If there is one serious concern in the market, it’s the fact that valuations have run up quite sharply and we have not seen any meaningful improvement in results which indicate solid improvement in earnings growth.
The Indian Rupee lost some ground and was down 19 paisa or 0.23% to close at Rs 83.56 to the US Dollar. There appears clarity in the US markets that there would be no immediate rate cut and that in the current calendar year there would be just one rate cut. Dow Jones lost 209.83 points or 0.54% to close at 38,589.16 points. Dow gained on just one of the five sessions and lost on four.
In primary market news, we had one issue which opened and closed for subscription last week. The issue from Le Travenues Technologies Limited was subscribed 98.1 times overall. The QIB portion was subscribed 106.73 times, HNI portion was subscribed 110.25 times and the Retail portion was subscribed 53.95 times. There were 26.75 lakh applications overall.
In the week ahead, we begin the week with a trading holiday on Monday. This will shorten the week and increase volatility to some extent. There are three issues which are opening in the coming week. The first of the lot is the issue from DEE Development Engineers Limited which is tapping the capital markets with its fresh issue of Rs 325 crores and an offer for sale of 45.82 lakh shares in a price band of Rs 193-203. The company is into the business of piping solutions for the oil and gas sector, chemical sector and super critical and power sector. It also makes structural towers for the wind energy space. It began operations in Haryana and has now expanded operations into Kutch at Gujarat. This place is strategically located with two ports Kandla and Mundra in the vicinity, customers for wind energy having their sites in the vicinity and major steel suppliers being in a 25-kilometer radius. The location helps in reducing costs on account of inward transportation significantly. The expansion happening at Kutch will take about 6-8 months to fructify. I believe the company has a great future and would do well post the commissioning of the new plant. The numbers of the company would reflect improved scale and efficiency for the year ended March 26. Only, if you have an investment horizon of 18 months or more should you invest now. There may always be listing gains looking at the market mood, but otherwise investment is for the medium to long term.
The second issue is from a NBFC based out of Rajasthan, Akme Fintrade (India) Limited. The company is raising through a fresh issue of 1.1 crore shares in a price band of Rs 114-120. The issue opens on Wednesday the 19th of June and closes on Friday the 21st of June. The NBFC space is crowded and recent issues in this space have not done well. The company and its merchant banker have chosen not to have a roadshow in Mumbai for this issue. Speaks volumes for their confidence in marketing the issue. One wishes them luck.
The third issue is from Stanley Lifestyles Limited which is tapping the capital markets with its fresh issue of Rs 200 crores and an offer for sale of 91,33,454 shares in a price band of Rs 351-369. The issue opens on Friday the 21st of June and closes on Tuesday the 25th of June. The company is a bespoke manufacturer of super-premium and luxury furniture brands in India. It’s a home-grown brand and a little over half its revenues comes from sofas and recliners. The company crafts its products as per the requirement of its customers and everything’s made to order. The business has been growing and with funds being raised to open more stores, benefits of the same would be available as time passes. The company is into a niche segment where luxury defines markets. Take a measured call as growth in revenues will not be a factor of perpendicular growth.
Coming to the markets in the week ahead, as mentioned earlier it would be a four day week. Momentum and market breadth are in favor of the bulls and there seems to be no letting go by them as of now. However, the run-up has been fast and other than the sharp one day correction on 4th June, there have been no meaningful corrections as of now. Market corrections come suddenly and without warning. Will it happen this week or the next? Not sure. Keep one ear to the ground and prepare for the same because that could be sharp and meaningful. Until that happens, ride the wave as long as the going is good.
Simple strategy for the period ahead would be to ensure that you have no overnight exposure as markets could open gap-up or gap-down. This could be dangerous. Trading opportunities would exist galore and provide plenty of trades to be facilitated. Use the opportunities to trade and await the correction when it comes.
Trade cautiously.
