Markets were on a roll last week and did much better than expected. The only note of caution was towards the second half of the week when on Thursday the rise was much less than the earlier days and Friday saw markets recovering from early losses dramatically, but closing almost flat. At the end of the week, BSESENSEX gained 1,478.38 points or 2.47% to close at 61,223.03 points while NIFTY gained 443.05 points or 2.49% to close at 18,255.75 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.48%, 2.45% and 2.50% respectively. BSEMIDCAP gained 2.40% while BSESMALLCAP was up 3.06%.

The Indian Rupee gained 15 paise or 0.20% to close at Rs 74.15 to the US Dollar. Dow Jones had a choppy and volatile week with sharp intraday swings. It closed with losses of 319.85 points or 0.88% at 35,911.81 points.

In data that should be considered very important for the stock market perspective, Demat accounts in the country have doubled from 4.08 cr accounts in April 2020 to 8.05 crs as of the current date. Similarly, the strength of the Indian investors collectively has been brought out where they have invested through SIP (Systematic investment plan) over the last five years Rs 4.57 trillion. Against this over the last 7 years, FII’s have invested Rs 3.53 trillion in Indian markets. On a like-to-like basis, FII’s have invested on average 50,000 crs per year while domestic investors have invested on average 91,000 crs per year. These numbers become significant and add weight to the fact that even when FII’s were sellers in the Indian markets, our markets held their own and did not fall. This was contrary to what would happen in earlier times when there was a direct relation to FII purchases and sales and market movement.

Life Insurance Corporation of India Limited or LIC is expected to file its DRHP later this month. The number of policyholders and those of them who do not have a Demat account is very large as of now. This number could be as large as 4-5 cr unique policyholders. There would be a need for them to open a Demat account as the government proposes to have a reservation of shares for such policyholders and would also be offering them a discount to the issue price. I believe this could be a very big initiative in bringing at one-shot many new first-time investors to the capital market. Would not be surprised if this would work out on similar lines that the Jan Dhan Yojana did to the banking sector. Readers would recall the flurry of initiatives that the banking sector saw post that and the growth of fintech companies and multiple platforms offering schemes for the bottom of the pyramid and upwards. The final number of unique policyholders and those not having a Demat account would probably find mention in the DRHP once available.

Covid-19 has seen a spurt in cases in the country as well. The good part is that systems are better placed this time around than they were when the second wave hit us. The number of vaccinations has increased to 156.79 crs of which the first vaccination is 90.91 cr and fully vaccinated are 65.46 crs. The precaution dose which has just begun has seen 0.42 cr vaccinations so far.

The first primary issue for the calendar year 2022 would open on Wednesday the 19th of January and close on Friday the 21st of January. The issue from AGS Transact Technologies Limited is an offer for the sale of Rs 680 crs in a price band of Rs 166-175. The company is in the business of providing customized products and services comprising ATM and CRM outsourcing, cash management, and digital payment solutions including merchant solutions, transaction processing services, and mobile wallets.

The issue which is an offer for sale would see the promoter settling the loans taken for providing an exit to the PE investor before the shares are listed on the bourses. An amount of Rs 650 crs from the offer proceeds would be utilized for the same. This would lead to a significant surge in profitability for the company as the cost of interest on this loan would cease to remain there. The company had reported an EPS of Rs 7 in FY 2020 which fell to Rs 4.62 in FY 2021. Based on this EPS, the PE band is 36.48-38.46 times FY 2021 earnings. As mentioned earlier, this would stand corrected as the loan gets repaid and results in profits moving up significantly and the EPS rising to much higher levels than the FY 2020 numbers. The trigger for the share would be the digital initiative that the company has and revenues could rise sharply in the coming two to three years. The share merits a look and investment would be beneficial for investors in the medium to long term.

Coming to the markets in the week ahead, they would be choppy and volatile. NIFTY has risen 1,051.80 points or 6.11% in the first fortnight of the January or January series and that would be difficult to replicate as we go forward. There would be corrections and provide plenty of trading opportunities. Further, the primary market is opening up for the year now that Sankranti is over many issues are expected in the next fortnight. This would keep markets active but volatile. Secondly with such a spectacular rise and new lifetime highs within a couple of days move away only, expect heightened volatility and also a few corrections. I strongly believe that even though markets are in an uptrend, they cannot run away from here.

Trade cautiously.

The first week of the new calendar year 2022, saw markets in India open with a bang. FII’s who were big sellers in the last couple of months, stopped selling and actually made net purchases. This changed the sentiment and at the end of the third day of the week, things looked hunky dory. Thursday saw a correction and even though Friday saw markets gain, it was small compared to what we saw in the earlier part of the week. At close, BSESENSEX had gained 1,490.83 points or 2.56% to close at 59,744.65 points while NIFTY gained 2.64% or 458.65 points to close at 17,812.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.65%, 2.45% and 2.37% respectively. BSEMIDCAP gained 2.01% while BSESMALLCAP was up 1.95%.

The Indian Rupee gained three paisa or 0.04% to close at Rs 74.30 to the US Dollar. Dow Jones hit a new life time high of 36,953 points and a new closing high of 36,799.65 points during the week. It however closed with a small loss of 106.64 points or 0.29% for the week at 36,231.66 points. The fall came post the minutes of the recent US Fed meeting being made public, where it appears imminent that a rate hike is round the corner. This caused markets to correct and NASDAQ saw an even deeper correction. The much debated and controversial crypto currencies took yet another beating across the board.

In political news in India, the Election commission has announced one day poll in four states of Uttarakhand, Goa, Manipur and Punjab. There would be a seven-phase poll in Uttar Pradesh. The elections would begin from the 10th of February and counting would take place on 10th of March.

Results season for the third quarter, October to December 2021 will kick in with full earnest in the coming week. January 12th will see three IT companies declaring their results. They are TCS, Wipro and Infosys with TCS also announcing terms of its fourth buyback along with its quarterly results. While results season keeps the markets busy and volatile, it also ensures that sector rotation keeps on constantly happening.

In primary markets news, no new primary issues have been announced for the calendar year so far. While there are many waiting on the side-lines, any announcements are still waited. The mega issue from LIC is likely to see the company file its DRHP in the coming week. The issue would see the first ever reservation for policy holders and would in all probability entail a small discount as is known for retail investors and the new policy holders category. The market would be following this issue closely as reports value the company around the 10 lac cr market capitalisation level.

In terms of newly listed shares since 18th November, 6 out of the 17 listings are trading at a discount as of Friday.

The rapid rise in covid-19 affected people has taken its toll on the stock markets. While the number of affected people has risen rapidly, it has not led to people being hospitalised or resulting in deaths. Not being a medical expert, it would suffice to say that in all probability this is a milder variant but more of a spreader, affecting significantly larger populations. The number of affected people has increased globally and we saw more than 2 million cases in the last couple of days. Further, the number of active cases globally has risen very rapidly and is currently at 41.57 million cases with 17.87 million cases in the US alone. In India this number is at a mere 0.59 million cases.

Coming to the markets in the week ahead, it would be a week of consolidation with a positive bias. BSESENSEX would trade in a range of 700 points plus/minus from the present levels of 59,744 points while NIFTY would trade in a range of 250 points plus/minus from the present range of 17,812 points. The present strategy of buying on dips and selling on rallies should continue. With the market breadth increasing substantially, it may make sense to include some midcap and Smallcap stocks where they are expected to perform well in the coming quarterly results. Refrain from getting carried away by the momentum stocks.