Markets have a way of testing the patience of people and this week was a great example of that. We crossed the level of 25,150 points on NIFTY for each of the first four days of the week but failed to close on any day above 25,150 points. Finally they succumbed  to pressure which came from the Israel-Iran skirmish as of now, but has the potential to become something much bigger if not contained. USA bombed Yemen and the Middle East is boiling. Crude which was hovering around 60-62$ has again risen quite sharply to around 74-75$ and could be another surprise as the war in its fourth day gets nastier and ugly. On a side note, Ukraine -Russia war is like the never-ending soap opera which continues on and on. 

What has all of this done to our markets? They seemed to be on the verge of a breakout and faltered badly. While like I mentioned earlier four consecutive intraday moves past 25,150 points on NIFTY and one touching 25,222 points, not one close above 25,150 points. Friday, the last day of the week saw NIFTY fall intraday to as low as 24,473 points before recovering smartly to close at 24,718 points. In all this turmoil we saw the week end with BSESENSEX losing 1,070.39 points or 1.30% to close at 81,118.60 points while NIFTY lost 284.45 points or 1.14% to close at 24,718.60 points. BANKNIFTY lost 1,051.05 points or 1.86% to close at 55,527.35 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.14%, 1.14% and 1.08% respectively. BSEMIDCAP lost 0.84% while BSESMALLCAP lost 0.13%. The bright spot was BSEIT which gained 2.72%. Call it index balancing or a sign of things to unravel with June quarter results due in a fortnight’s time, not sure. Markets lost on three of the five trading sessions and gained on two. 

The Indian Rupee was under pressure and lost 44 paisa or 0.51% to close at Rs 86.08 to the US Dollar. Dow Jones lost on one trading session and gained on two. On the remaining two sessions it was flat with net change of a single point. Dow lost 565.08 points or 1.32% to close at 42,197.79 points. 

The primary markets seem to be getting active again. The issue from Oswal Pumps Limited has tapped the capital markets with the same having opened on Friday the 13th of June. The issue would close on Tuesday the 17th of June. The issue consists of a fresh issue of Rs 890 crores and an offer for sale of 81 lakh shares in a price band of Rs 584-614. The PE band for the company is 59.47-62.53 times its earnings of Rs 9.82 for the year ended March 24. 

The company manufactures solar-powered and grid connected submersible and monoblock pumps, electric motors comprising induction and submersible motors as well as solar modules which are sold under the ‘Oswal’ brand. They are actively engaged under the PM KUSUM YOJANA, under which turnkey solar pumping systems are installed at the farmers fields. Bulk of the revenue of the company has come under this scheme and it is over 75% in FY24 and 85% in nine months December 24. The company has emerged as one of the largest suppliers under the scheme. 

Revenues in year ended March 24 were at Rs 758 crores which have risen to Rs 1,065 crores in the nine months period. Profits for the whole year were at Rs 97.66 crores which have risen to Rs 216.70 crores in the nine months. EPS has risen from Rs 9.82 to Rs 21.77. The company would be increasing its capacity for pumps from 2 lakhs to 5 lakhs. 

The increase in sales in the short period is primarily from the fact that they have started supplying under the government scheme the full package which includes the pump, controls and the solar panel and infrastructure which increases the cost of the whole package, compared to just the pump earlier. Margins of the company are substantially higher than its competitors as they have done backward integration to almost manufacturing everything other than basic raw materials. The advent of solar has made a sea-change in the lives of farmers and one can expect these welfare schemes to continue and help the company achieve faster and sustainable growth. Investment in the company is warranted with a medium-term perspective. 

There is likely to be a flurry of activity in the primary market with half a dozen IPOs planned in the next 10 days. These would be companies who want to tap the markets with December 24 numbers, for whom the deadline would expire on 30th June. 

Coming to the markets in the coming week, expect markets to keep global cues in mind and react accordingly. The G-7 would be holding its annual event in Canada this time where the agenda is trade talks but would certainly discuss geo-political tensions in different parts of the world. Key resistances for the markets continue to remain the taking out of 25,150 and closing above it for NIFTY. Key support becomes Friday’s low of 24,473 on NIFTY and 80,354 on BSESENSEX. If these were to break, next levels would be at 24,000 around on NIFTY and at 79,000 points on BSESENSEX. 

The strategy would be to refrain from doing trade unnecessarily. Understand that many of us are compulsive and need to do something. You may trade in shares that you own and do intraday trades where you may sell and buy or buy and sell. The next few days are crucial as Iran is nuclear powered and has oil fields as well. Both of these are targets of Israel and anything could happen. 

Trade cautiously.

The week began on a quiet note and all action was left for the RBI governor to bring about post his bi-monthly review meeting. He led from the front and has given the markets, ahead of the economy enough fuel to fire on all cylinders. This saw the market post fresh gains for the week and give the markets the desired thrust to break out of previous resistances in the coming week. BSESENSEX gained 737.98 points or 0.91% to close at 82,188.99 points while NIFTY gained 252.32 points or 1.02% to close at 25,003.05 points. Bank NIFTY gained 828.70 points or 1.49% to close at 56,578.4 points, which incidentally is a new lifetime high for the index. The broader markets saw BSE100, BSE200 and BSE500 gain 1.15%, 1.30% and 1.46% respectively. BSEMIDCAP gained 2.07% while BSESMALLCAP was up 1.96%. Markets gained on three of the five trading sessions and lost on two. What is interesting to note that at the end of four sessions, markets were flat for the week and all momentum has come post RBI announcement. Another way of looking at it is that the gains mentioned above are for the day and the week.

The Indian rupee lost 7 paisa or 0.08% to close at 85.64 to the US Dollar. Dow Jones gained on three of the five sessions and was up 492.80 points or 1.17% to close at 42,762.87 points. Here again, markets were flat after four sessions and all gains have come on Friday. Interestingly the spat between Trump and Eoin Musk has gone viral and has caused many a heart to beat at double the rate. 

In primary markets we had four listings last week which included Aegis Vopack, Schloss Bangalore, Prostarm Info Systems and Scoda Tubes. None of the four performed spectacularly and could be termed as a bit of a disappointment. At the end of the week, three of them are trading in a range of plus 7.3% to 9.5% while one is trading at negative 0.60%. Clearly wakeup call for merchant bankers that fund raising cannot be only for the benefit of promoter. There must be something on the table for people who invest in the company as well. 

RBI has given a bountiful to the economy and the markets. It announced a third consecutive repo rate cut and this time raised it to 50 basis points. While I had spoken about the same in the newsletter last week, the same should not be taken as a great insight as I did not anticipate a 100 basis points cut in CRR to 3%. This would be done in four tranches of 25 basis points each starting from 6th of September to 29th of November. 

The markets have their best ever chance to break out of the shackles and cross the resistance that it is encountering at 25,150 levels. Bank NIFTY is at a new lifetime high and with a weightage of 42%, it gives it the momentum to lead NIFTY to cross the resistance. If it does so, there would be an upward target of 25,450-550 points which would open up and give room on the upside. On the downside we have support at 24,800-24,850 and further lower at 24,100 points around. 

The strategy would be to ride the momentum and initiate fresh longs once market crosses 25,150 and sustains. One should not get surprised if that happens in the first part of Monday’s trading but one should observe whether the momentum is maintained or encounters selling. Post these events the next event would be the Quarter one results and probably before that the US-India trade agreement. Both of these events would be closely watched. Once 25,150 is crossed and sustained the support level would shift upwards to 25100-25,150 and that should be closely followed and respected. 

With an early monsoon breaking out, a good forecast for the coming monsoon, favorable credit policy with clear focus on inducing a push to lending and inducing consumption, well controlled inflation, global support against our neighbor post the outreach, one believes that this is the time for us to give our markets the support it needs.  

Happy hunting, but do not get carried away.