Markets continued their upward momentum and notched up weekly gains. During the week markets gained on three of the five days and lost on the remaining two days. BSESENSEX gained 508.30 points or 1.33% to close at 38,672.91 points. NIFTY was up 167 points or 1.46% to close at 11,623.90 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.53%, 1.645 and 1.68% respectively. BSEMIDCAP was up 2.67% and BSESMALLCAP gained 1.82%.
The week also saw March futures expire and they had a great series as well. NIFTY March futures expired at 11,570 points, a gain of 777.50 points or 7.20%. This was one of the best monthly performance in the last few months. The BSESENSEX and NIFTY are literally a stone’s throw away from making new life-time highs. Another way of putting the same thing would be that with under a per cent more required, it could happen any day. Does this mean that we would see a new high on Monday when markets open? Not necessarily, it could take longer.
The Indian Rupee lost 20 paisa or 0.29% to close at Rs 69.15 to the US Dollar. Dow Jones had a strong performance and gained 426.36 points or 1.67% to close at 25,928.68 points.
The week ahead sees RBI meeting for its first monetary policy review of financial year 2018-2019 on April 3rd and 4th. It is believed that there would definitely be a rate cut of 25 paisa. While the 25 basis points cut is given there are a few people who believe that the cut could be more at 50 basis points. While 25 is par for the course, a 50 basis points cut could act as the catalyst for markets to touch new highs if not already done.
Shares of MSTC Limited listed on Friday the 29th of March and they had a poor showing. The company had tapped the capital markets with its offer for sale which was not subscribed at the first attempt and the issue was extended. In the extension, the issue did get oversubscribed. Shares which were issued at Rs 120, closed for the week at Rs 114.20, a loss of Rs 5.80 or 4.83%.
The week ahead sees the offer for sale of RVNL. Rail Vikas Nigam Limited is offering for sale 25,34,57,280 equity shares in a price band of Rs 17-19 with a discount of Rs 0.50 for retail and eligible employees. The issue has opened on Friday the 29th of March and would close on Wednesday the 3rd of April. The company which is a PSU is incorporated by the Ministry of Railways. It executes projects for the Ministry of Railways on assignment basis and is given a consolidated management fee of 8.5% on the project value that it undertakes.
There are two other railway companies which also happen to be listed namely RITES and Ircon. While they also do the job of track laying and electrification, their size in these departments is considerably smaller than what RVNL does?
The company has an order book of over Rs 77,000 crs of which roughly Rs 37,000 crs are long gestation projects. The company would be able to execute the balance of roughly Rs 40,000 crs between 36-42 months. The company is a consistent profit making and dividend paying company. Being part of the PSU stable, it is obligated to pay 30% of profits or 5% of net worth, whichever is higher as dividend. The issue looks attractive.
The second issue is from Metropolis Healthcare Limited which is tapping the capital markets with its offer for sale of 1,30,85,095 shares in a price band of Rs 877-880. The company maybe compared with Dr Lal Path Lab and Thyrocare. While the PE multiple at which the company is valuing itself is cheaper than Dr Lal, it is much more expensive than that of Thyrocare. Further the promoter’s shares are currently pledged and assuming he repays from the sale proceeds of the IPO, he would still be in some debt. Markets don’t take too kindly to pledged shares of the promoter.
There is concern about the valuation and the pledged shares. While the company has grown significantly and has aggressively used the inorganic route, going forward the same may be a tougher option. Setting up touch points through the franchisee route would be the way forward. While opportunity exists, the amount an investor is willing to pay will depend on himself.
Markets in the week ahead are on course to continue their upward march and most probably hit new life time highs on the BSESENSEX and NIFTY. As already mentioned, even after hitting new highs, it’s not as if it would be the end of the road for the markets, momentum would continue. Enjoy the rally and be prepared for volatility as things get choppy in unchartered territory.
