Markets had a volatile week and made their highs mid-week on Wednesday itself before some profit taking set in and markets gave up some of their gains. BSESENSEX gained 572.91 points or 1.59% to close at 36,594.33 points while NIFTY gained 160.70 points or 1.51% to close at 10,768.05 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.27%, 1.14% and 1.23% respectively. BSEMIDCAP gained 0.81% while BSESMALLCAP was up 1.59%. The intra week high made on Wednesday was 36,828 points on the BSESENSEX and 10,847 on NIFTY.

The Indian Rupee lost Rs 0.57 or 0.76% to close at Rs 75.20 to the US dollar. Dow Jones gained 436.40 points or 1.7% to close at 26,075.30 points.

There are two primary market issues in the week ahead. The first issue is from Rossari Biotech Limited which is in the business of manufacturing speciality chemicals. The issue comprises of a fresh issue for Rs 50 crs and an offer for sale of 105 lac shares in a price band of Rs 423-425. The PE multiple of the issue is steep at 31.52 at the lower end of the band and 31.67 at the top end of the band. The company had earned an EPS of Rs 13.23 on a diluted basis for the year ended March 2020. The issue opens on Monday the 12th of July and closes on Wednesday the 15th of July. The company has on Friday allotted 35.02 lac shares to 15 anchor investors comprising of 29 entities. While it has a good future and the capex being undertaken would bear fruit in the financial year 2021-2022, it looks expensive currently but could be invested in only if one is willing to wait for two years. Alternatively, one could invest when the markets cool off.

The second issue is a follow-on offer from Yes Bank Limited. The company would be raising Rs 15,000 crs in a price band of Rs 12-13. The share price of Yes Bank closed at Rs 25.50, down Rs 0.65 or 2.49% for the week. There is a strange arbitrage available on the exchange in the shares of Yes Bank. Those who are bullish are buying the share at Rs 25.50 and lending them on the ‘ALBM’ (automated lending and borrowing mechanism) platform of the exchange for Rs 10. This effectively means their cost of purchase becomes Rs 25.50-10 Rs equals Rs 15.50. For somebody who is bearish, he sells the share at Rs 25.50, pays the borrowing charge of Rs 10 and is therefore short on the exchange at Rs 15.50. The buyer and the seller have their reasons for doing so at Rs 15.50 when the huge issue of Rs 15,000 crs would happen at Rs 13. There is a third angle where the grey market premium is active at Rs 1.25-1.75 per share. Taking a mid-price of Rs 1.50, this fresh issuance would come at Rs 14.50 (13+1.50). It therefore becomes a very interesting take for all view holders whether they be bullish or bearish between Rs 14.50-15.50.

The shares are being offered at a price to book of 0.69-0.75 times. This is comparable to valuations that PSU banks trade at but a steep discount to what private banks are trading at. If one believes that the bank has cleaned up its books and would be able to deliver once it has raised capital, it becomes an attractive investment at the valuation it is being offered at. The anchor investors coming into the company on Tuesday would be a key indicator.

There is a new twist to the Yes Bank saga with media reports indicating that SEBI is to investigate the large amount of stock borrowing at such a high premium over the last several days at a fancy premium and this would suggest insider trading by people connected with the issue of Yes Bank.

Covid-19 patients have jumped in the week gone by even as the number of people recovering is keeping pace. The number of patients affected by covid-19 globally is now at 130.35 lacs with 5.71 lac deaths and 75.81 lac patients having recovered. In India the number of patients is at 8.79 lac with 23,187 deaths and 5.54 lac patients having recovered. Compared to the previous week the number of new patients globally has jumped by 14.80 lacs with 34,800 deaths and 10.41 lac patients having recovered. In India the number of new patients is at 1.81 lacs, with 3.500 deaths and 1.29 lac patients recovering.

The week ahead sees two new issues opening and closing during the week. Markets would continue to remain choppy and volatile and with midcap and Smallcap stocks showing extreme volatility there would be further churn with a large number of stocks moving circuit to circuit both upward and downward. It makes sense to play the contrarian role and book profits at every available opportunity without looking to short the market. The result season has begun for the April to June quarter and it would not be anything to write home about. Even the IT giant TCS had a tough quarter and if this is a test case one can be sure that we have tough times ahead. Be nimble footed in the market and use every rise to take money of the table. Better opportunities to buy at lower levels will be available in the weeks to follow.

The week gone by began on a subdued note losing on the first two trading days and then gaining on the next three to end the week on a strong note. BSESENSEX gained 850.15 points or 2.42% to close at 36,021.42 points while NIFTY gained 224.35 points or 2.16% to close at 10,607.35 points. The broader market saw BSE100, BSE200 and BSE500 gain 1.95%, 1.77% and 1.63% respectively. BSEMIDCAP gained 0.23% while BSESMALLCAP was the odd one out losing 0.22%.

The Indian Rupee gained 1.03 or 1.36% to close at Rs 74.63 to the US Dollar. Dow Jones gained 623.35 points or 2.49% to close at 25,638.90 points.

Half the calendar year 2020 has passed and it’s a good time to take stock of the broad movement of the markets over the past six months. BSESENSEX began the year at a level of 41,253.74 points and made a high of 42,273.87 points in January itself. Thereafter it drifted before falling very sharply in March and making a bottom at 25,638.90 points. From this low made on 24th of March, markets have been gaining and closed at 36,021.42 points. Broadly speaking they gained 1,000 points in January, then lost 16,600 points till March and since then have gained 10,400 points, making a total of 28,000 points which is about 70% of the base at the beginning of the year of 41,253.74 points. Similar numbers for NIFTY are 12,168.45 points at beginning of year, 12,430.50 points which was the top of the year so far in January, 7,511.10 points the low in March and 10,607.35 points the current value. The total movement here is about 8,300 points which is a similar 68-69% of the value of NIFTY at the beginning of the year. The point being emphasised is the strong movement that we have had so far taking into account the pandemic, tension along the borders and global reasons. With six months more to go one can expect significant change yet to happen.

Ruchi Soya is in the news ever since Patanjali bought the company under the IBC rules. The stock has been gaining nonstop until the beginning of this week. On Monday (29th June) it rose to hit a high of Rs 1,535 and then hit the lower circuit at Rs 1,432. It hit lower circuit on all the five days of the week to finally close at Rs 1,166. Another stock which has been in the news from the Smallcap segment behaving similarly was Alok Industries which hit a high of Rs 61.40 on Friday (3rd July) and then closed at the lower circuit of Rs 55.60. Will Alok Industries follow Ruchi Soya the same way only time will tell. The media had got after these two companies and more so Ruchi Soya and repeatedly questioned the rise in price and why SEBI was not investigating.

Besides the above two mentioned stocks there have been many more where they have risen circuit to circuit and are now being distributed. Its an indicator to become cautious as the people behind the stock having made money are sitting pretty.

KKR has acquired an almost 40% stake in JB Chemicals at a price of Rs 745 per share. The share price of JB Chemicals closed at Rs 718 on Friday. The deal would trigger an open offer wherein KKR would acquire up to 26% of the shares from the present shareholders. The share price of the company has seen a massive upsurge from Rs 425 to the current price of over Rs 700 in the last three months.

The number of people affected globally by covid-19 has reached 115.56 lacs with 5.36 lac people having died and 65.35 lac people having recovered. In India the number of affected people has increased to 6,97,836 people with 19,700 deaths and 4,24,891 people having recovered. India is now the third most affected covid-19 affected nation in the world after USA and Brazil. Compared to the previous week, the world has seen 12.94 lac new patients, 32,360 deaths and 9.80 lac people having recovered. In India we have had 1.48 lac new patients, 3,213 deaths and 1.03 lac people recovering.

Coming to the markets, they continue to gain ground as we have FPI’s and domestic institutions investing in the markets. On days we find either FPI or Domestic institution buying with the other selling, while on some days both are buyers and, on some days, both are sellers. In totality there is net inflow which keeps the momentum and trajectory upwards. How much more and how far is a very difficult call and almost impossible to predict. Suffice to say that the time has come to begin taking money of the table and waiting for markets to decide their future course of action. It would be extremely difficult for markets to continue to gain significantly from current levels without a meaningful correction. Book profits, but refrain from shorting at current levels.