The Week gone by saw consolidation and markets rallying as well as the benchmark indices lost on three of the five trading days, while gaining on the remaining two. The week end saw BSESENSEX gain 115.89 points or 0.28% to close at 41,257.74 points while NIFTY gained 15.10 points or 0.12% to close at 12,113.45 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.25%, 0.33% and 0.43% respectively. BSEMIDCAP was down 1.53% while BSESMALLCAP was down 1.06%. It could be said while the benchmark indices registered small gains the rest were under pressure.
The Indian Rupee gained 5 paisa or 0.07% to close at Rs 71.40 to the US Dollar. Dow Jones was up 295.57 points or 1.02% to close at 29,398.08 points. On the Coronavirus front there are no positive news and the same continues to spread with isolated cases in many more countries. In China even the earlier health workers are beginning to get affected with the virus.
On the primary market front, the much-awaited issue from SBI Cards is expected to hit the markets in the last week of February to first week of March. The issue has garnered huge expectation and is actively traded in the grey market. It is widely expected to create records in the amount of subscription value garnered in the HNI category and the NBFC circle which finances such applications is expecting an amount upwards of 1 lac crs.
IEA (International Energy Association) has forecast a drop in global energy demand for the first time in a decade for the current Quarter, January to March 2020. A big contributor of this is the slowdown and lockdown being witnessed in China on account of the Coronavirus.
Result season is over for the third quarter of FY20 and it has been a mixed bag so far. While there have been some green shoots visible, it could partly be on account of the tax rebate announced by the government for corporates in September 2019, which has now been factored in. The financial sector has seen some rebound-on resolution of many insolvency cases and further there seems to be a demand increase as well. While it is early days, in another fortnight there would be better clarity.
Results from the railway companies have seen a stellar performance and the street has reacted positively to them. IRCTC, IRCON and RITES have gained on the street while RVNL has faltered. Incidentally RVNL has yet to take a call on the new tax rates and would do so in the final quarter of FY20. Shares of IRCTC touched an intra-week high of Rs 1,609.30 before closing at Rs 1.579.95, a weekly gain of Rs 66.10. Since its IPO listed on the 14th of October, the share which was issued at Rs 320 has moved up almost 5 times gaining 393.73%.
SEBI the regulator needs to take a call on companies which have gone to IBC, the insolvency court for resolution and the trading in these shares thereafter. Take the case of Essar Steel after a little over two years the resolution happened and the buyer cancelled all outstanding shares. In the case of Ruchi Soya, the shares were reorganised and the value became 1/100th of the face value. Shareholders had no idea of this kind of reduction was being planned. Yet another example is Jet Airways where the share is seeing regular trading even though no definitive bids have been received even after over a year has passed. This writer has a simple suggestion that all such companies’ shares be put under suspended category and trading be frozen with due notice until there is resolution and clarity on shareholders interest.
The crisis in Sterling and Wilson Solar Limited continues. The company declared its results for the quarter and there was a sudden agenda item of interim dividend on the board meeting date also included. Probably the dividend announced which is 600% (Rs 6 per share of Re 1 face value) was meant to be a carrot for minority shareholders. The management continues to justify its action of rescheduling the loan repayment by the promoter as valid and not contravening any law whatsoever. Its high time the regulator came out with its version on this issue.
The telecom issue has become so complicated that it leaves me more confused than clear. I therefore believe it is best left to Supreme Court, Government and the players to sort out the same.
Coming to the week ahead there would be both sided movement and market trading in a broad range. The BSESENSEX is likely to trade in a range of 40,900-41,900 while NIFTY would trade in a range of 12,000-12,400 points. The breakdown or breakout in either direction if it does happen and sustain could see a sharp movement but that looks highly unlikely.
The strategy for the week would be to buy on any sharp fall and sell on strong rallies. The possibility of the same happening may not materialise, but one must be prepared.
