The week gone by behaved as expected with fireworks during the first three days. Thereafter correction set in and markets ended marginally negative, having surrendered all the gains. Incidentally there were new highs recorded on the benchmark indices during the week. BSESENSEX lost 98.48 points or 0.19% to close at 52,386.16 points while NIFTY lost 32.40 points or 0.21% to close at 15,689.80 points. The broader indices saw BSE100 remain flat while BSE200 and BSE500 gained 0.08% and 0.20% respectively. BSEMIDCAP was up 1.37% while BSESMALLCAP gained 1.20%.
In what should be termed as significant, BSESENSEX hit a new lifetime intraday high of 53,129,37 points on 6th of July and a new lifetime closing high of 53,054.76 points on 7th of July. NIFTY on the same day (7th July) hit a closing high of 15,879.69 points while the intraday high continues to remain at 15,915.65 points made on 28th June. The fall from the highs is significant in that the correction wiped out all the gains and markets ended in negative territory. This also suggests that markets are now trading in a broad zone which could be classified as 51,700 – 53,100 on BSESENSEX, a range of 700 points on either side of the current close. Similarly on NIFTY, the range would be 15,450-15,950, a range of 250 points either side from the current close. To break out in either side, would need strong news flow which looks unlikely in the immediate current scenario.
The Indian Rupee gained 10 paisa or 0.13% to close at Rs 74.74 to the US Dollar. Dow Jones had a very strong showing on Friday and gained 1.3% on Friday. This helped the Dow recover lost ground and manage to close with small gains of 83.81 points or 0.24% to close at 34870.16 points.
In primary market news, shares of India Pesticides Limited listed on Monday the 5th of July. Shares which were issued at Rs 296, closed at Rs 343.15, a gain of Rs 47.15 or 15.93%. After drifting down during the week, shares recovered on Friday and closed at Rs 344.25.
The offer for sale from road developer G R Infraprojects received excellent response and was subscribed 102.58 times. The company had launched its IPO for sale of 1.15 cr shares in a price band of Rs 828-837. The QIB portion was subscribed 168.58 times, HNI portion was subscribed 238.04 times, Retail portion was subscribed 12.57 times and Employee portion was subscribed 1.37 times. There were 23.80 lac applications.
The offer for sale from Clean Science Technology Limited which had tapped the markets with its issue for Rs 1,546.22 crs in a price band of Rs 880-900 was subscribed 95.54 times. The QIB portion was subscribed 159.93 times, HNI portion was subscribed 211.12 times and Retail portion was subscribed 9.20 times. There were 26.94 lac applications received in the issue.
Retail interest in the primary market and secondary markets has been increasing significantly ever since the onset of covid-19. While CDSL has more than 4 cr demat accounts as of date, NSDL has 2.25 cr demat accounts. Even after deducting the multiple accounts that investors may have, the unique number of demat account holders has certainly crossed the 5 cr mark. This also points to the fact that around 25 lac applications are the average number received in primary market offerings.
Zomato presents itself to Indian Investors in US Dollars
The first issue from a unicorn dealing in platform-based food delivery system is being launched next week. Zomato Limited is tapping the capital markets with its fresh issue of Rs 9,000 crs and an offer for sale of Rs 375 crs, in a price band of Rs 72-76. The issue opens on Wednesday the 14th of July and closes on Friday the 16th of July. While the offering is unique in nature, it has also created some dubious firsts in India.
This is the first issue where the presentation to media, brokers and analysts was made in millions of US Dollars even though the currency in which one has to apply is in INR or Indian Rupees. It appears that the company initially intended to list this share overseas in the first place, but on finding the huge appreciation in values in Indian stock markets decided to change the listing and offering venue. Even if one looks at the asking price it is based around 98-102 cents. Probably it therefore felt not necessary to change the currency of the presentation and instead chose to confuse investors with millions of dollars instead of millions of rupees. In over three decades that I have been associated with the capital markets and particularly IPO’s, have always been told that the presentation is culled from the RHP. Tried searching for the US Dollars in the document and failed. Wonder where the merchant bankers and the battery of lawyers are when this passed the muster or anything is permitted to Unicorns? The regulator needs to take a strict call on this event as with a number of such issues lined up, this could be made the norm and be troublesome for Indian investors.
Imagine having presentations in Chinese RMB, Japanese Yen, German Mark and so forth going forward.
Coming to the issue itself, the company is a loss making one and even though covid-19 was a god sent opportunity for the company to redeem itself and turn around it has failed to do so. The company seems to bleed and one is not sure whether the management also knows what they need to do to turn around this business. This feeling is based on replies that they gave to investors during their interaction. With cut throat competition, the urge to go back to dining out, and the feeling that delivery platforms overcharge on the restaurant’s menu and also take delivery charges while restaurants offer free delivery, could continue to hurt this business going forward. If on the other hand these platforms resort to discounting and deep discounting which they have already been accused of, losses could widen. In any case this IPO would give them Rs 9,000 crs to burn and this could help them last anything from 3-4 years. One final point against the IPO is the fact that in many cities, local restaurants have got together and created their own app to ensure online delivery to eliminate the need for platforms like Zomato and serve the customer better. It needs to be noted that Zomato has been demanding continuously increasing commissions from restaurant partners which is a sore point between the two.
As far as subscription to Zomato is concerned, investors need to decide whether it is only for listing or for the longer term. If it is for listing, there may be some pop on listing day as there would be oversubscription happening due to the presence of an active grey market. If it is for the longer term, avoid application now and wait for the share to list before taking a call. Things could be cheaper post a couple of days/week after listing.
On the covid-19 front, the world saw 18,76,32,756 patients, 40,49,071 deaths and 17,15,84,218 patients recovering. In India we saw 3,08,73,907 patients, 4,08,792 deaths and 3,00,07,200 patients recovering. Compared to the previous week, the world saw 32,57,644 new patients, 59,255 deaths and 28,59,357 patients recovering. In India we saw 3,07,277 new patients, 6,520 deaths and 3,33,928 patients recovering. The number of people who have been vaccinated in India has crossed 37.5 cr so far with over 7 cr people having received both vaccinations. The number of vaccinated people is on the rise as availability of vaccine improves and the effort to spread the word on vaccination being important and necessary gains ground.
Coming to the markets in the week ahead, we could see markets gaining ground in the early part of the week. Secondly with result season having begun, movement in markets would be range bound as mentioned. Market activity would be more stock specific and upon significant results being announced would impact stock specific and the sector involved. It makes sense to continue to sell on rallies and buy only on sharp dips. Plenty of such opportunities exist and are available, as last week one experienced. It will also help to book profits in midcap and Smallcap stocks and move to larger cap stocks where there is significantly higher safety available. Trade cautiously.
