The week gone by saw markets correcting themselves after having made lifetime highs on both intraday and closing basis. While a correction after a huge rally is always welcome. This brings us close to the level where the rally must commence again in the next couple of days. If that does not happen, there could be another sharp round of selling which would emerge. This could probably put an end to the expected Santa Claus rally that one is used to seeing in Indian markets. BSESENSEX lost 686.83 points or 1.09% to close at 62,181.67 points while NIFTY lost 199.50 points or 1.07% to close at 18,496.60 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.95%, 0.96% and 0.96% respectively. BSEMIDCAP was a big loser and was down 4.32% while BSESMALLCAP lost 1.18%. Our markets lost on four of the five trading sessions and gained on one. The IT pack lost substantial ground on Friday and brought down markets. 

The Indian Rupee was under pressure and lost 95 paisa or 1.17% to close at 82.27 to the US Dollar. Dow Jones too was under pressure and lost on three of the five trading sessions, gaining on just two. It lost 953.42 points or 2.77% to close at 33,476.46 points. 

RBI announced its credit policy after the three-day meet which was held from Monday the 5th of December to 7th December. RBI has raised repo rates by 35 basis points to 6.25%. This comes after three consecutive rate hikes of 50 basis points each. This has come on the back of inflation easing but at the same time growth tapering. RBI has revised downwards GDP for FY23 to 6.8%. 

In primary market news, we had one listing and have three IPOs opening and closing next week. Shares of Dharmaj Crop Guard Limited which had issued shares at Rs 237, listed on Thursday. The discovered price was Rs 266, and shares after touching an intraday high of Rs 278.90 closed at Rs 266.40. They gained Rs 29.40 or 12.40%. On Friday they lost ground and closed at Rs 249.85, a gain of Rs 12.85 or 5.42%. 

Shares of Uniparts India Limited would list on Monday the 12th of December. The issue was entirely an Offer for sale. The price band was Rs 548 -577. 

The first issue is from Sula Vineyards Limited which is tapping the capital markets with its offer for sale of 2,69,00,530 equity shares in a price band of Rs 340-357. The issue will open on Monday the 12th of December and close on Wednesday the 14th of December. The fundraise at the top end of the price band would be Rs 960 crs. The selling shareholders include the Promoters and PE Investors. 

Sula is in the business of producing wine and is India’s largest wine producer and seller. The company has a dominant market share and is slightly higher than half by value in the 100% grapes wine market. The company has its wine making facilities in the states of Maharashtra at Nasik and in Karnataka. There is a subsidy which was given on the export of grapes towards transportation which has been withdrawn recently. Similarly, the refund of state taxes which was available for wine in the state of Maharashtra has been put on hold and would act as a big dampener on the performance of Sula if not reinstated. 

The company reported revenues of Rs 453.91 crs for the year ended March 22. Revenues in the six months ended September 21 were at Rs 159.15 crs which have risen to Rs 224 crs in the current six months ended September 22. Net profit for the full year was at Rs 69.53 crs. For the current six months they were at Rs 41.25 crs against Rs 5.62 crs. The EPS for the year ended March 22 was at Rs 6.53. The PE band at this price is 52.07-54.67 times. The company has chosen to compare itself with breweries and liquor manufacturers like United Spirits, Radico Khaitan and United Breweries. These companies are strictly not comparable as they are in allied business but certainly not identical business. 

The share has more than its fair share of issues going forward. Readers would be well advised to subscribe for listing gains. 

The second issue is from Abans Holdings Limited which is tapping the markets with its fresh issue for 38 lac shares and an offer for sale of 90 lac shares. The price band of the issue is Rs 256-270 and the issue opens on Monday the 12th of December and closes on Thursday the 15th of December. The allocation is 10% for QIBs, 30% for HNIs and 60% for Retail investors. The company is a holding company and operates in the diversified financial space through 17 subsidiaries and step-down subsidiaries. 

It reported an EPS of Rs 13.37 for the year ended March 22. The PE band is 19.15 – 20.19. The company has compared itself with three broking outfits namely: Edelweiss, Geojit and Choice. These companies are not strictly comparable as their broking activities are substantially larger. The business is complex and the proposed listed entity would have to demonstrate its core strengths before the company could be invested into.  

The third and final issue is from premium and luxury car retailer, Landmark Cars Limited. The company is tapping the capital markets with a fresh issue of Rs of Rs 150 crs and an offer for sale of Rs 402 crs. The issue opens on Tuesday the 13th of December and closes on Thursday the 15th of December. The price band of the issue is Rs 481-506. 

The company sells cars from Mercedes, Honda, Volkswagen, Jeep, EV maker BYD, Renault and Commercial vehicles of Ashok Leyland. It is present in 8 states through 112 outlets for sales and service. The company sold 19,264 new vehicles in FY22 against 13,282 in FY21 and serviced 2.79 lac vehicles against 2.21 lac vehicles in the same period. The company reported revenues of Rs 2,976 crs against Rs 1,956 crs. The PAT was Rs 66.18 crs against 11.14 crs. The EPS on a diluted basis was Rs 17.45. The PE band was 27.56 – 29. 

Looking at the press reports which said that automobile sales in November 22 were at record highs, and registered a growth of over 25% over the previous year, this business has everything going for it. Readers would be advised to look at the company for the medium term and long term as India rises to become a five trillion economy. 

Coming to the market in the week ahead, expect them to remain volatile. One does not have too much news flow expected as we move towards the last fortnight of the calendar year. There is not much expected from overseas as well, other than the FED meeting on 12th and 13th of December. This could give some sharp volatility to US markets and hence to the world. Expect markets to react to this news and decide whether they are likely to move to form new highs or turn sideways to negative. 

The strategy for the week would be to play to the market moves and keep a close eye to volumes. Any sharp moves without volumes cannot happen at this juncture. Markets have to display volume and movement in the same direction. They would continue to be led by midcap and Smallcap space. Trade cautiously.

Markets continued to be on a roll in the week gone by. They were led by new lifetime highs on the benchmark indices with the midcap and Smallcap stocks which showed strong traction getting almost there as well. As the market breadth continues to expand, expect the midcap and Smallcap stocks and the sector to post new lifetime highs in the week or weeks to follow. BSESENSEX gained 574.86 points or 0.92% to close at 62,868.50 points while NIFTY gained 183.35 points or 0.99% to close at 18,696.10 points. The broader markets fared much better and we saw BSE100, BSE200 and BSE500 gain 1.18%, 1.42% and 1.50% respectively. BSEMIDCAP was up 2.84% while BSESMALLCAP gained 2.43%. Markets gained on the first four days of the week and there was some amount of profit taking witnessed on Friday in the benchmark indices while the midcap and Smallcap gained on Friday as well. 

The Indian Rupee gained 36 paisa or 0.44% to close at Rs 81.32 to the US Dollar. Dow Jones saw the markets gain on three of the five trading sessions. There was a very sharp swing day on Wednesday in the US, when markets after being negative gained over 700 points on a net basis. The FED Chairman Jerome Powell said at a meeting on Wednesday, “Time for easing rate increases is coming”. This led to the sharp recovery and optimism that going forward in 2023, we may not see 75 basis point rate hikes. All over the world one sees, short covering being a major reason for sharp and swift rallies and Wednesday was no exception. 

In primary market news, we are likely to see two road shows of companies tapping the capital markets happening during the course of the week. While they are yet to announce details and timelines, the issues would open in the week beginning the 12th of December. These issues are expected from Sula Vineyards Limited and Landmark Cars Limited. 

The mood in the market currently is difficult to explain or put down in words. There is optimism because the midcap and Smallcap has started to move. There is disbelief because results have not been encouraging. Global markets are not at their best led by inflation which is at unseen levels though seems to have stopped rising and therefore Central banks have been raising interest rates. The war between Russia and Ukraine has become a never-ending affair and losing relevance as the world realises there is no short-term solution. In such a scenario, why the strong rally is a little baffling. 

The only explanation for India’s rally is the fact that we have had a technical breakout when we crossed the lifetime highs and are undergoing the follow through momentum from the same. How much and how far this would go is still a matter to debate. There are a few stages which the market must go through before this momentum gets over. Firstly, this rally has to get wider and wider, with many more stocks participating. The same has started but we have quite some distance to go before it gets over. Secondly, the participation has to increase significantly and many more investors currently sitting on the side-lines would enter the market. Finally, markets would witness unprecedented volumes and volatility. Having said this, it is not to imply that there can be no other way that markets would move, but this is the broad script which is witnessed each time. Post all this getting over, markets would become extremely volatile and then become sideways after violent and volatile moves. 

The strategy to adopt in such times which we can foresee, is to keep selling and booking profits in companies which have not delivered results on expected lines. Secondly to sell those companies which have performed and are now trading at multiples which have become expensive and uncomfortable to hold. There may be a time which comes when the portfolio is knocked off, but having made money one should not have regrets. Stay light in the final stage with plenty of cash to buy on dips which will be sharp and happen without notice. All this will take time and December will be a good time to get into the oncoming and impending crescendo. 

Coming to the markets in the week ahead, expect the momentum to continue and become bigger with more stocks participating. Strong support exists at the levels of 18,450-18,500 on NIFTY and 62,100-62,250 on BSESENSEX. Levels of around 19,000 and 63,700-63,800 would be resistances. Buy on sharp dips and continue to book profits as markets see plenty of whiplashes and churning. One last point, we may have a situation where the benchmark indices do not perform while midcap and Smallcap do so.