Markets continued their choppy and volatile manner during the week gone by. The end result was quite straight forward with the first three days of trading resulting in losses and the remaining two days seeing the market record gains. In reality it was not so. On each of the three days of losses, markets had opened positive and were up for a sizeable part of the day before selling brought the markets down and turn negative. On Thursday, markets were weak and recovered form the lows to record gains. BSESENSEX gained 558.27 points or 1.03% to close at 54,884.66 points while NIFTY gained 86.30 points or 0.53% to close at 16,352.45 points. The broader indices saw BSE100 and BSE200 gain 0.30% and 0.17% respectively while BSE500 lost 0.11%. Similarly, while BSEMIDCAP gained 0.05%, BSESMALLCAP lost a massive 2.77%. For the records, the low on BSESENSEX was 53,425 points while it was 15,903.70 points on NIFTY. 

The Indian Rupee was volatile and closed virtually unchanged losing 1 paisa or 0.01% to close at Rs 77.56 to the US Dollar. Dow Jones had a stellar week and gained on all five days of the week. Dow Jones gained 1,951.06 points or 6.24% to close at 33,212.96 points.

May expiry saw the series lose 892.60 points or 5.18% to close at 16,352.45 points. The series was volatile and saw markets move in both directions. The high of the series was on the opening day 29th of April of 17,377 points while the low was 15,735 points. The low has been tested twice and would be a point of support in the immediate short term.

Primary markets were active with there being three listings and two issues closing for subscription.

The first share to list was from Delhivery Limited which had issued shares at Rs 487. Shares closed on listing day at Rs 537.25, a gain of Rs 50.25 or 10.31%. Shares gained some ground to close the week at Rs 541, a gain of Rs 54 or 11.09%. 

The second share to list was from Venus Pipes and Tubes Limited which had issued shares at Rs 326. Shares closed day one at Rs 351.75, a gain of Rs 25.75 or 7.89%. The share lost some ground during the week and closed at Rs 334.40, a gain of Rs 8.40 or 2.58%.

The third share to list was from Paradeep Phosphates Limited which had issued shares at Rs 42. Shares closed day one at Rs 43.95, a gain of Rs 1.95 or 4.64%. 

Two issues closed their subscription during the week. The first was eMudhra Limited and was open from Friday the 20th of May till Tuesday the 24th of May. The price band was Rs 243-256. The issue was subscribed 2.74 times overall with QIB portion subscribed 3.93 times, HNI portion subscribed 1.31 times and Retail portion subscribed 2.67 times. There were 2,18,894 application forms. 

The second issue was from Aether Industries Limited which had opened for subscription on Tuesday the 24th of May and closed on Thursday the 26th of May. The price band was Rs 610-642. The issue was subscribed 6.62 times overall with QIB portion subscribed 19.36 times, HNI portion 2.63 times, Retail portion 1.19 times and Employee portion subscribed 1.12 times. There were 1.85 lac applications. 

The week ahead has three listings with Ethos Limited listing on Monday, eMudhra Limited listing on Wednesday and Aether Industries Limited listing on Friday. No fresh issues are slated thereafter. 

There is a new type of incident happening in IPOs prominently since the beginning of April 22. A large number of applications are being rejected in every issue as they are not being banked after being bid. This is on account of investors not giving confirmation to the UPI message which is sent to them for applications bid through syndicate brokers. Rejection of 1-2 lac applications has become the norm. In LIC the number was 12 lacs out of 73 lac applications. In Prudent Corporate Advisory it was 1.10 lac applications from 1.53 lac applications. In Delhivery it was 1 lac forms from 1.73 lacs and in the case of Venus it was 1.92 lac applications out of 6.28 lac applications. In the case of Paradeep Phosphates about 1.75 lac applications were not banked against 4.11 lac applications.

Ethos was a serious example by itself. The issue was for a fresh issue of Rs 375 crs and an offer for sale of Rs 100 crs. The issue was subscribed 1.10 times and had received 88,476 application forms. Post the closure, this number was reduced to 20,238. The fall at 77.12% is serious and indicates that all is certainly not well in the system. The issue complied with regulations for subscription with the two merchant bankers to the issue contributing Rs 14 crs each approximately to the issue and completing the process. This is a serious issue and hope the regulator with merchant bankers find solutions before some issue goes down under. The area where things seem to be going out of control is applications which are bid at syndicate member terminals. 

The week ahead begins with a holiday in the US on Monday on account of Memorial Day. This will allow markets in India to resume their upward momentum of the last two days and build on it. Expect markets to correct post the strong momentum. Key resistances would be around the 16500-16,600 levels. If these are crossed, the next resistance would be 16,850-16925 levels on NSENIFTY. These would correspond to levels of 55,700-56,000 points on BSESENSEX. The next level for resistance would be 56,500-56,800 points. Whether these levels particularly the second are reached during the week look doubtful but are mentioned as key extremes. As far as immediate support is concerned, lows of the previous week at 53,400 and 15,900 levels will act as strong support. 

The strategy for the week would be to play for the expected bounce when the week begins. Expect some correction thereafter and momentum to again pick up after the correction. Sell on strong rallies and buy on dips. It continues to be a trader’s market. 

The week gone by saw markets gain sharply on expected lines. However, the volatility witnessed must have certainly increased the number of heart patients in the marketplace. We saw markets have a great day with gains of over 2.2% on Tuesday, to coincide with the listing of shares of LIC Of India Ltd. This was followed by an equally sharp fall on Thursday and yet again another sharp rally on Friday. What explains the kind of movement on Tuesday, Thursday and Friday is yet to be ascertained. The remaining two days of the week were flat with one day of gain and one day of loss. The week ended with BSESENSEX gaining 1,532.77 points or 2.90% to close at 54,326.39 points while NIFTY gained 484 points or 3.07% to close at 16,266.15 points. The broader indices saw BSE100, BSE200 and BSE500 gain 3.01%, 3.06% and 3.16% respectively. BSEMIDCAP was up 3.17% while BSESMALLCAP was up 4.09%. 

The Indian Rupee lost 10 paisa or 0.13% to close at Rs 77.55 to the US Dollar. Dow Jones had a torrid week and lost 978.90 points or 2.90% to close at 31,261.90 points. Markets made a new 52 week low on Friday before recovering to close flat. Dow Jones is now down 13.97% on a year-to-date basis. Dow was up three days during the week and lost on two days. Incidentally, there was a massive loss on Wednesday when Dow lost 1,165 points. NASDAQ continues to be under severe pressure and now trades at 11,354.62 points. NASDAQ on a year-to-date basis is down 27.42%. With the tech pressure, one saw the IT stocks in India also under pressure and BSEIT was the top sectoral loser. 

RBI has reduced the payment in form of dividend for the year ended March 2022 to a mere Rs 30,307 crs. This is in sharp contrast to the Rs 99,122 crs for the previous year. This incidentally is the lowest dividend from RBI to the government in the last decade. 

Excise duty on Petrol has been reduced by Rs 8 per litre and Rs 6 per litre on diesel. This would see an impact of Rs 9.50 on petrol prices and Rs 7 plus on diesel. This would be further reduced if various states chip in with matching rate cuts on local taxes as well. Further there have been some cuts on import duties of certain plastic products and steel manufacturing products as well. 

The primary markets were active last week with two listings and two issues opening and closing for subscription. A third issue has opened for subscription and would close on Tuesday. 

The mega issue from LIC of India Limited which had issued shares at Rs 949 listed on the bourses on Tuesday. The share had a tepid listing and closed with losses. It ended day one at Rs 875.45, a loss of Rs 73.55 or 7.75%. At the end of the week, the share had lost further ground and closed at Rs 826.45, a loss of Rs 122.55 or 12.9%. 

The second listing was on Friday of Prudent Corporate Advisory Services Limited which had issued shares at Rs 630. Shares closed day one at Rs 562.70, a loss of Rs 67.30 or 10.68%. Incidentally this company as per the basis of allotment saw its retail portion subscription reduce significantly by 17.40 lac shares in an issue size of 85.49 lac shares. Effectively this meant that an issue which was subscribed 1.22 times was reduced to being undersubscribed to the extent of just 80%. Surprising the way the system works and is being creamed by the intermediaries and management concerned. 

The first issue which was open for subscription was from Paradeep Phosphates Limited. The issue was open from Tuesday the 17th of May till Thursday the 19th of May. It was subscribed 1.88 times overall with QIB portion being subscribed 3.40 times, HNI portion undersubscribed at 0.86 times and Retail portion subscribed at 1.44 times. 

The second issue was from Ethos Limited which had opened for subscription from Wednesday the 18th of May and closed on Friday the 20th of May. The issue was subscribed overall 1.10 times with QIB portion subscribed 1.17 times, HNI portion subscribed 1.54 times and Retail portion under subscribed at 0.87 times. One hopes that one doesn’t experience any changes in subscription levels as was visible in the case of Prudent. God forbid if something like that happens, investors would lose complete faith in the bidding system used in IPOs. 

The third issue which has opened for subscription is from eMudhra Limited. The company is tapping the markets with its fresh issue for Rs 161 crs and an offer for sale of 98.35 lac shares in a price band of Rs 243-256. The issue has opened for subscription on Friday the 20th of May and would close on Tuesday the 24th of May. The company is into the business of certifying authority of digital signatures. The issue on the first day was subscribed 0.49 times with the retail portion subscribed 0.96 times. 

The second issue to open for subscription is from Aether Industries Limited which would open on Tuesday the 24th of May and close on Thursday the 26th of May. The fresh issue consists of Rs 627 crs and an offer for sale of 28.20 lac shares in a price band of Rs 610-642. The company is into the business of manufacturing super speciality chemicals at its facility in Sachin near Surat in Gujarat. 

The company reported revenues of Rs 450 crs for the nine months ended December 2021 and a net profit of Rs 82.9 crs for the same period. It enjoys a PAT margin of 18.45% which is sustainable going forward looking at the order book, niche products and customer base. The company is expanding its manufacturing base as well. The EPS reported for the nine months was Rs 7.45. If one were to annualise these numbers, the EPS would be Rs 9.93. Based on these numbers, the PE band for the issue would be 61.43-64.65. These numbers are without considering the dilution of equity or the incremental growth that the company would experience in the current financial year 2022-23. Niche business, but looks a tad expensive considering the limited five-year manufacturing experience of the company. 

The week ahead would see shares of Delhivery Limited and Venus Pipes list on Tuesday the 24th of May. 

The week ahead has May NIFTY futures expire on Thursday the 26th of May. The current level of NIFTY at 16,266.15 points is lower by 978.90 points or 5.68%. It’s a strong lead for the bears and they are unlikely to allow the bulls to have their way. While bulls will try and recover some lost ground as they did last week, expect markets to gain initially and then correct as we get closer to the 16,500-16,650 levels. Global markets led by Dow have become not only highly volatile but vulnerable with inflation and price rise hitting every country. 

The trading strategy would be to allow the markets to gain initially and then sell on strong rallies. Buying is warranted only on dips. Readers must bear in mind that the kind of volatility witnessed last week and over the last month or so is indicative of high nervousness. Such markets have always been vulnerable and tend to trade with a negative bias. While there is a possibility of some more upward movement, suffice to say that the possibility of a new low is more likely than the possibility of that not happening. As of last week, we came close to the low made on 8th of March 2022, and were short of just 400 points on the BSESENSEX and 140 points on NIFTY. This break in the medium term is imminent with only the rise before the fall uncertain. Trade cautiously.