Markets in the week gone by made a valiant attempt to make new lifetime highs but failed. The top five-six heavyweight stocks in the benchmark indices need to fire on all cylinders at the same time for something like that to happen. That is the missing piece. However, the midcap and Smallcap indices are firing away and continue to make new highs. Markets saw the benchmark indices rise on two of the five trading sessions. They lost on two, and the fifth was a flattish day. At the end of it, BSESENSEX inched up 78.52 points or 0.13% to close at 62,625.63 points while NIFTY gained 29.30 points or 0.16% to close at 18,563.40 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.17%, 0.29% and 0.40% respectively. BSEMIDCAP gained 0.82% while BSESMALLCAP was up 1.64%. 

The Indian Rupee lost 16 paisa or 0.19% to close at Rs 82.46 to the US Dollar. The US FED meets between the 13th and 14th June for its policy review meet where there could be a small interest rate hike before a pause begins. This would be because the last job data showed that unemployment rose in the country. How the Dow reacts to the FED statement would influence world markets. Dow Jones gained on the last four sessions continuously and lost on one session. Dow Jones gained 114.02 points or 0.34% to close at 33,876.78 points. 

RBI in its bimonthly policy meeting kept interest rates unchanged. Repo rate remains at 6.5%. RBI has conveyed its intention to tackle inflation and make best efforts to bring the same down. The differential between the Repo rate in India and the US Fed rate would probably be the lowest ever in over 25-35 years that I have understood such interest rates and what they mean. The rupee needs to show strength and start appreciating slowly so that the forward cover comes down as we go forward. This would be a big help.

The IPO from Ikio Lighting which was open between Tuesday the 6th of June and Thursday the 8th of June fared very well and beat all expectations. The issue which comprised a fresh issue of Rs 350 crs and an offer for sale of 90 lac shares was oversubscribed 67.75 times overall. The QIB portion was subscribed 163.06 times, HNI portion was subscribed 65.38 times and Retail portion was subscribed 14.30 times. There were 16.33 lac applications received. The price band was Rs 270-285. 

The benchmark indices had made their lifetime highs on 1st December 22 and we are trying to make new highs once again but failed to do so. At the same time action which is concentrated in the midcap and Smallcap space has moved these indices to new levels altogether. BSEMIDCAP on the 1st of December made a high of 26,146 points and then saw a high of 26,440 points on 15th of December. It hit a low of 23,356 points on the 28th of March and since then has been moving in an uptrend virtually non-stop. The high made last week was 27847 points. The difference between the 1st of December 22 and today is 1,700 points or 6.5%. 

BSESMALLCAP has had a similar movement as well with the 1st December level being 29,816 points, and then saw a high of 30,092 points on 15th December. The 28th March low was 26,120 and the high during the week was 31,391 points. The difference being 1,576 points or 5.28%. This is a segment where FPIs are active in a handful of stocks only and even domestic mutual funds are selective. Public participation is large and markets are doing well. 

Coming to the markets in the week ahead, the outcome of the FED meeting would play an important role. There is expectation of a rate hike this time around. Markets would continue to strive to make new highs and as mentioned earlier the attempt can only be successful if the heavyweights fire. Two of them are getting ready. The first being Reliance with the impending corporate announcement of the demerger of the financial services record date. The second would be the timeline of the HDFC Twins merger record date. Both these companies have the potential to provide the boost that the markets are looking for. 

The strategy for the week would be to look for action in the midcap and Smallcap space.  Sharp movement looks unlikely and besides the FED meeting, corporate announcement as mentioned above, the only trigger could be the break of monsoon in large parts of the country. Trade cautiously.

Markets last week opened with a bang and gained sharply on the first two days. The rally seemed to have then fizzled out but a sharp rebound on Friday seems to have provided ammunition for the bulls. The ensuing jobs data on Friday night followed by the strong rally in the US, rings hope for a probable new high next week in India. Markets gained on the first two days followed by Friday, while they lost on Wednesday and Thursday. BSESENSEX was sort of flattish for the week gaining 45.42 points or 0.07% to close at 62,547.11 points while NIFTY gained 34.75 points or 0.19% to close at 18,534.10 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.32%, 0.46% and 0.64% respectively. BSEMIDCAP was up 1.83% while BSESMALLCAP was up 2.40%. 

The Indian Rupee gained 28 paisa or 0.34% to close at Rs 82.30 to the US Dollar. Dow Jones had a volatile week and gained on three of the five trading sessions. The gains over the last couple of days, changed the mood in the US. Job data on Friday evening was very positive and markets there gained over 2%. At the end of the week, Dow gained 669.42 points or 2.02% to close at 33,762.76 points. The next FED meeting due in the following week between 13-14th June is widely expected to keep interest rates unchanged. 

RBI meets between June 6-8 for its bi-monthly MPC meeting to review interest rates. Looking at economic data on GDP and inflation, it is widely believed that interest rates would remain at status quo. Confirmation of the same would result in markets saluting the event and outcome and could see the bulls stepping on the accelerator. 

After a fairly long lull in the primary markets, we have an issue opening next week. Ikio Lighting Limited is tapping the capital markets with its fresh issue for Rs 350 crs and an offer for sale of 90 lac equity shares in a price band of Rs 270-285. The issue opens on Tuesday the 6th of June and closes on Thursday the 8th of June. The company had prior to the IPO reorganised its business and acquired group companies and merged all of them under one roof through subsidiaries. The company’s primary business is manufacturing LED lighting solutions and it focuses on providing low energy LED products to help India meet its sustainability goals. The company is an ODM player and supplies to large players who then distribute the products under their brand name. The largest customer for Ikio is Signify Innovations India Limited, erstwhile Philips Electronics India Limited. 

The company has its manufacturing plants in Haridwar and Noida and is further expanding in these regions. On a restated pro forma consolidated basis, the company reported revenues of Rs 333.99 crs for the year ended March 22. Its profit after tax was Rs 50.51 crs and the EPS was Rs 7.77. For the nine months ended December 22, revenues increased to Rs 332.79 crs and profit after tax was Rs 51.43 crs. The EPS was Rs 7.90 on a non-annualised basis. 

The objects of the issue are debt repayment of Rs 50 crs and investment in the company’s subsidiary of Rs 262.87 crs. Based on the restated proforma consolidated basis, the PE price band is 34.75-36.68 based on the year ended March 22. 

Looking at the nature of the business, it is highly competitive and has a pricing overhang as it supplies to a dominant OEM player. Going forward, the margins could be under pressure as the company looks to scale up with substantial investment in new capacities. One needs to take a measured call for investment in the above company. 

The week ahead has the RBI meeting for its policy review meeting. While the outcome here is more or less assured, markets would be focussed on achieving new highs which came within a whisker last week. The all-time highs were made on the 1st December 2022 on a closing basis and an intra-day basis. These levels were 63,583.07 and 63,284.19 points on BSESENSEX and 18,887.60 points and 18,812.50 points on NIFTY. Last week we made intraweek highs of 63,036.12 points on BSESENSEX and 18,662.45 points on NIFTY. With FPIs being big buyers during May 23 and having invested Rs 43,838 crs, it appears the tide is turned and a new high would happen sooner than later. 

In the week ahead, the first resistance would be this top made last week at levels of 63,036.12 points and at 18,662.45 points. This would be followed by the all-time highs at 63,583.07 and 18,887.60 points. On the support side, markets have strong support at 18,300-18350 levels on NIFTY and at 62,025-62,175 levels on BSESENSEX. If these are violated, the next levels would be at 18,000-18,050 or 61,150-61,300 levels. 

It appears looking at Indian markets and the mood here and also global cues, we are well set to witness new highs in the coming week. Brace yourselves for action.