The week gone by had all the action one could think of. Markets lost sharply, gained sharply and were also undecided. To add to the drama, we had a mid-week holiday which kept us guessing about the overseas action. At the end of the week, BSESENSEX gained 764.34 points or 1.33% to close at 58,191.29 points while NIFTY gained 220.30 points or 1.29% to close at 17,314.65 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.22%, 1.28% and 1.37% respectively. BSEMIDCAP gained 2.14% while BSESMALLCAP gained 2.57%. Markets gained on two of the four trading sessions and lost on the remaining two. 

The Indian Rupee was under pressure and lost 98 paisa or 1.20% to close at Rs 82.32 to the US Dollar. Dow Jones gained on the first two days and lost on the remaining three days and was up 571.35 points or 1.99%. It closed at 29,296.76 points. What is however disturbing is the fact that on a year-to date basis the Dow is down a staggering 19.43%. What is worrying is that with less than 2.5 months for the calendar year to end, Dow is barely higher around 2% from its 52-week lows. 

In primary market news, the fresh issue from Electronics Mart Limited received overwhelming support and was subscribed 75.78 times. The QIB portion was subscribed 178.63 times, HNI portion was subscribed 67 times and Retail portion was subscribed 20.77 times. There were 20.46 lac applications. The issue which was for Rs 500 crs garnered response for roughly Rs 26,700 crs including anchor. 

There is another issue from Tracxn Technologies Limited which is tapping the capital markets with its offer for sale of 3,86,72,208 equity shares in a price band of Rs 75 to 80. At the top end of the band the issue would be for Rs 309.38 crs. The issue opens on Monday the 10th of October and closes on Wednesday the 12th of October. The issue has a reservation of 75% for QIB’s, 15% for HNI’s and 10% for Retail investors. 

Tracxn Technologies is a leading global Private Market Intelligence SaaS Platform. It offers use of its vast database as a service on payment of requisite fees. Its average revenue is about Rs 6.5 lacs and this is for three users, per year. 70% of the companies’ revenues comes from overseas while the remaining is from domestic. The business of this company purely for purposes of understanding can be compared with Bloomberg which has a database of entities in the listed or public space. Tracxn has data in the unlisted space and hence getting data is that much more difficult. Currently Tracxn is ranked amongst the top five global players in terms of entities profiled. 

In terms of revenues, the company clocked Rs 63.45 crs of revenues for the year ended March 22 which have increased to Rs 18.40 crs at the end of the first quarter FY23. The company reported a loss of Rs 4.85 crs for the year ended March 22. For the first quarter there is a marginal loss of Rs 72 lacs on restated basis. While the logical conclusion would be that the company would turn profitable going forward, the same may be some way away. 

The company is currently a loss-making company and is unlikely to become profitable in the immediate near future. The accounting entry on ESOP conversion would be a drag for some time. There would therefore be no EPS and hence no PE. The way to then value would be a multiple of sales which would be a steep 13.90 times based on fully diluted post ESOP equity. ESOPs outstanding are 1 cr shares which have been issued at Rs 1. In terms of expenditure almost the entire expenses are related to manpower and this is something which cannot be reduced. Readers are advised to skip the issue at application and look for better opportunities post listing. 

In what could be termed as most unexpected, Nykaa declared a bonus issue of five shares for every share held even before completing its first year of listing on the bourses. Considering the fact that it is yet to demonstrate sustained profitability and growth, this seems out of place. Normally one sees bonus issues being done from profits which are capitalised. Here the company is doing this from the reserves on account of issue price premium. While it may not be fair or correct to compare this company with what Reliance Power did, the idea is to keep investors in the company as the lock-in is about to expire, as shares were listed on 30th November 21. Further when the price of the share ex-bonus would trade in the region of 200-250, more retail investors would get sucked into the web that the company is weaving.  

Coming to the markets in the week ahead, results season will kick in with the top three IT companies declaring their results. TCS does so on Monday the 10th October, Wipro on Wednesday and Infosys on Thursday. This would give a sense about this industry, the rupee parity and impact of inflation on jobs and IT spend in the US. The previous week’s highs were made at 58,578 points and 17,428 points on the BSESENSEX and NIFTY respectively. These would be strong resistances in the week ahead which is likely to be a week of volatility and markets testing ones’ patience.  The next targets would be 59,250-59,550 and 17,650-17,750. On the support side, levels of 57,250 and 17,000-17,050 should act as strong supports. In case of violations, the previous week’s lows of 56,150 and 16,750 would act as supports. 

I believe the lower levels will not be approached and markets would make an attempt to trade higher after initial setbacks. Look for supports and buy on dips. Results for the July-September quarter will be key for the markets going forward. Buy on dips and sell on strong rallies would be the strategy for the week ahead.

Markets last week took their toll and many a prediction just fell by the wayside. The week was eventful as well, but truly speaking markets have a mind of their own. BSESENSEX lost on the four days of the weeks into expiry, and had a fantastic day on the first trading day, of the new October futures series. At the end of it all, BSESENSEX lost 672 points or 1.16% to close at 57,426.92 points while NIFTY lost 233 points or 1.34% to close at 17,094.35 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.42%, 1.58% and 1.51% respectively. BSEMIDCAP lost 1.65% while BSESMALLCAP was down 1.25%. 

The Indian Rupee was under pressure and lost against the US Dollar. It was down 35 paisa or 0.43% to close at Rs 81.34 to the US Dollar. Dow Jones continued its downward move and lost on 4 of the five trading sessions. It closed with losses of 865 points or 2.92% at 28,725.41 points. On Friday it closed almost at the new 52 week low of 28,715.85 points. For the year to date, Dow is down 20.95%. 

RBI in its monetary policy meeting held during 28th September-30th September, raised Repo rates by 50 basis points to 5.90%. These are the highest rates over the last three years. The rate hike was on expected lines. It has pegged inflation at 6.7% and expects the growth rate to be around 7%. 

After inflation in the US at record highs, the next to be affected is Germany with new inflation data for September showing that it has entered into double digit at 10%. The Russia-Ukraine conflict which has entered its eight month period seems to have hit different countries in different manners. 

September futures expired on a weak note and the series lost 704.35 points or 4.02% to close at 16,818.10 points. 

The low made by the benchmark indices during the previous week were 56,147.23 points on BSESENSEX and 16,747.70 points on NIFTY. Friday saw a huge recovery from the lows and markets went on to rise magnificently. What could be the cause of the same is still debatable. RBI announced its policy on Friday which was on acceptable lines and comments by the RBI Governor were positive. While this was good news, the fact that FPI’s sold on Friday and ended the month with sales of Rs 18,300 crs was not good news. Domestic institutions were net buyers of Rs 14,120 crs. Interestingly, FPI’s were net buyers only in August and have been net sellers for quite some time. NAV propping used to be a phenomenon in earlier years, but now makes no difference.

In primary market news, shares of Harsha Engineers International Limited who had issued shares listed on the bourses on Monday the 26th of September. Shares which were issued at Rs 330 saw the discovered price at Rs 444 and touched a high of Rs 527.60. They fell from there and closed day one at Rs 485.90, a gain of Rs 155.90 or 47.24%. By the end of the week, the share saw some profit taking and closed lower at Rs 461.50, up Rs 131.50 or 39.84%. 

Electronics Mart India Limited is tapping the capital markets with its fresh issue of Rs 500 crs in a price band of Rs 56-59. The issue opens on Tuesday the 4th of October and closes on Friday the 7th of October. The company is into the business of consumer durables and electronic retailing in India. It was historically present in the unified state of Andhra Pradesh, now bifurcated into Andhra Pradesh and Telangana. As part of its expansion strategy, it has entered into the NCR region. 

Coming to the revenues of the company, they are back on track and have recovered from the covid-19 impact. The company clocked revenues of Rs 4,353 crs for the year ended March 2022. This has improved in the first quarter of FY23 to Rs 1,410 crs. In terms of PAT the company recorded a profit after tax of Rs 103.9 crs for the full year and Rs 40.65 crs for the first quarter. The EPS for the year ended March 22 was Rs 3.46. The price earnings band at this EPS is 16.18 – 17.05. The performance in the first quarter has improved significantly and the EPS is Rs 1.36. Though there is seasonality in the business with the first and third quarters being the best for the company, this would get neutralised with new stores opening aggressively in the next 18 months. 

The rights issue from Suzlon for Rs 1,200 crs opens on Tuesday the 11th of October. The Chairman and Managing Director of the company, Mr Tulsi Tanti, passed away yesterday on the 1st of October. In my stock market experience of close to four decades, I do not recall any incident like this where the key person passes away in the midst of the fund raise. Tragic incident. I believe that though the loss is irreparable, it will not have any impact on the company. 

Markets have a mid-week holiday on Wednesday on account of Dussehra.  Midweek holidays normally break the momentum of markets as the holiday is India centric and world markets are open. They will be choppy and volatile to say the least. They are now trying to find their feet and establish a short-term bottom from where they could gather steam. 

Key resistance levels would be 56,550-56,850 on BSESENSEX and 17,250-17,350 on NIFTY. This would be the first hurdle that markets need to cross, and then sustain these levels for any revival in the market to be meaningful. Post this being done successfully, the next targets would be 57,750-58,000 and 17,650-17,750. On the support side, last week’s lows of 56,150 and 16,750 points should act as solid support. Even though global markets are in a turmoil, one believes that India should hold. The strategy should be to buy on dips closer to the support levels.