Markets had another good performance last week and gained ground. BSESENSEX gained 1,019.46 points or 2.26% to close at 46,099.01 points. NIFTY gained 255.30 points or 1.93% to close at 13,513.85 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.91%, 1.78% and 1.73% respectively. BSEMIDCAP gained 0.76% while BSESMALLCAP was up 1.36%. Benchmark indices hit new highs during the course of the week with BSESENSEX touching 46,309.63 points and NIFTY 13,579.35 points. Markets gained on four of the five trading days but volatility continues to be high on expected lines.

The Indian Rupee gained 15 paisa or 0.20% to close at Rs 73.65 to the US Dollar. Dow Jones lost 171.89 points or 0.57% to close at 30,046.37 points.

In economic news, Industrial production registered a growth of 3.6% and saw an eight-month high. In news concerning the stock market, the number of new demat accounts opened during the eight-month period April-November 2020 saw about 78.5 lac new accounts. This is roughly 19% over the base of 4 cr accounts as of March 2020. While a small percentage of these accounts could be multiple accounts opened by existing demat account holders due to the pandemic linked with the broker, it could be safely presumed that about 85-90% would be first timers. This would also explain the increase of investors applying for shares in the primary markets.

The week ahead sees probably the last primary market issue for the calendar year 2020 from Mrs Bector’s Food Specialities Limited which opens on Tuesday the 15th of December and closes on Thursday the 17th of December. The company is raising Rs 40.5 crs by way of fresh issue and Rs 500 crs by way of an offer for sale. The price band is Rs 286-288. The company had revenues of Rs 762 crs for the year ended March 2020 and a net profit of Rs 30crs. The EPS for the year was Rs 5.31 and the PE ratio a steep 53.96-54.24. Covid-19 has by and large benefited the company as its sale of biscuits and bread went up significantly while the institutional sales of buns used in burgers by McDonalds and Burger Kings was substantially lower. Overall, the company benefited and this could put them on a higher growth trajectory once the institutional sales are back to normal.

An interesting point is that the largest competitor in this space is Nestle India Limited. When this company went public its original name was Food Specialities Limited. It was only on 24th of March 1989 that the name was changed to Nestle India Limited. The issue from Mrs Bector’s will do very well at the subscription stage without doubt considering the business of biscuits and bread and bakery products that it is in. The company needs to use the platform it has built and the stock market listing to move from being a North India biscuit player to a pan-India player. Similarly, in the bakery division it needs to move from its presence in Delhi-NCR, Mumbai-Pune and Bengaluru to many more markets. The business is competitive and profits come from scale. Compared to Mrs Bector’s top line of about 760 Rs, Britannia has a top line of Rs 11,800 crs and Nestle a shade higher at Rs 12,600 crs. The company needs to grow fast and has to build capacity at a rapid pace to take advantage of the ever-growing market.

On the covid-19 front, the world saw 7,26,46,646 patients, 16,18,908 deaths and 5,08,64,816 patients recovering. In India we had 98,84,716 patients, 1,43,393 deaths and 93,88,159 patients recovering. Compared to the previous week, the world saw 52,60,384 new patients, 77,267 deaths and 42,84,683 patients recovering. In India, we saw 2,07,915 new patients, 2,803 deaths and 2,49,988 people recovering. Yet again patients recovering are substantially higher than new patients. Further the new patient rate has fallen substantially and is now closer to the 2-lac mark compared to the 6.25-6.5 lac mark in September. We also hear of vaccines which have entered the 3rd stage of clinical trials and they seem to be much nearer reality than ever before.

Global liquidity continues to fuel the markets and in the current month roughly 27,000 crs have been invested by FPI’s. One is not sure whether the flows would continue or take a break on historical basis as has been seen during Christmas in earlier years. Almost everyone in the market is bearish and expect markets to fall after a spectacular rally over the last 8 months and markets are therefore very interestingly poised. Who will blink first, bulls or bears, is the key question? One normally sees markets peak out with a flourish where bears are forced to cover and then the bulls just let go. Will that be the pattern this time as well or something different? The stage is set for the final showdown. It’s a matter of days and certainly not weeks. It makes sense to use rallies to sell and wait for the imminent correction before stepping back to markets.

Don’t get tempted by the sharp upward movement. The final thrust or the plunge is the biggest. Expect a big swing day in the coming week. Trade cautiously.

December began on a promising note with the BSESENSEX gaining 500 points on the very first day of trading. After remaining flattish for the next two days, the week ended with yet another flourish with BSESENSEX gaining 440 points. The week ended with BSESENSEX gaining 929.83 points or 2.11% to close at 45,079.55 points while NIFTY gained 289.60 points or 2.23% to close at 13,258.55 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.58%, 2.58% and 2.57% respectively. BSEMIDCAP was up 2.80% while BSESMALLCAP gained 2.62%.

The BSESENSEX made a new lifetime high of 45,148.28 points while NIFTY made a high of 13,280.05 points. Amidst the sectoral indices the top gainers were BSEREALTY and BSEMETAL which gained over 8% each. There were no losers but the one to rise the least was BSEBANKEX, up 1.41%. This would give an idea of the market depth which has increased significantly. A significant mover was the BSEPSU which gained 6.57%. One saw shares like GAIL gain 16.83%, ONGC 14.46% and SAIL 13.42%. There seems to be more steam left in this segment going forward.

The Indian Rupee gained 25 paisa or 0.34% to close at Rs 73.80 to the US Dollar. Dow Jones gained 307.89 points or 1.03% to close at 30,218.26 points. This incidentally was the high of the day and also the highest so far in the history of Dow Jones. For the year DOW is up 5.89%.

The primary offering from Burger King India Limited was a ‘WHOPPER’ success. The company which had tapped the markets with its fresh issue of Rs 450 crs and an offer for sale of 6 cr shares was subscribed an overall 157.16 times raising over Rs 70,000 crs. The QIB portion was subscribed 86.48 times, HNI portion 357.45 times and Retail portion 68.79 times. There were 24.15 lac applications. The response generated clearly indicates that there are a large number of first timers who have applied for this issue.

RBI kept key interest rates unchanged on expected lines. It also spoke of the GDP for the remaining part of the current financial year 2020-2021 to continue to rise.

The rally in the Indian markets is being fuelled by huge inflows from FII’s. In the first four days of the current month they have invested over Rs 10,000 crs so far. With the kind of liquidity and the investment not appearing to have moved to the midcap and Smallcap space so far, this rally still has steam left. This does not however mean that there will not be periodic corrections as time passes. On the contrary as we continue to trade in uncharted waters, the rally and corrections will be sharp and deep, though short lived. It is very important to stick to quality and fundamental stocks as the time has come where almost everything has started moving.

Covid-19 saw the world have 6,73,86,262 patients, 15,41,641 deaths and 4,65,80,133 patients recovering. In India we saw 96,76,801 patients, 1,40,590 deaths and 91,38,171 people recovering. Compared to the previous week the world saw 43,15,983 new patients, 76,546 deaths and 30,35,760 patients recovering. In India we saw 2,44,726 new patients, 3,413 deaths and 2,91,858 people recovering. The number of patients recovering compared to new cases is consistently declining in India for almost 8 weeks now. What is even more encouraging is the fact that number of active cases have now dropped to the 4-lac mark or thereabouts. This is indeed heartening.

The week ahead would see markets build on the gains of the previous weeks. Volatility is expected to increase as one would also see people booking profits on select days which would lead to sharp corrections and days when continued buying leads to sharp rallies. Unlike previous weeks when sharp declines were to be used for buying, the strategy now would change to taking some money of the table. Historically markets tend to peak in the beginning of the new calendar year and the same was witnessed in January 2020 as well. It took the pandemic and 8 months after the low of March 2020 to bounce back and make new highs all over again.

Use sharp rallies to book profits and wait for meaningful correction to re-enter the markets. With breadth increasing rapidly, one may also look at the better quality mid and small cap stocks which are yet to participate in the rally.