The week gone by saw markets lose on all the four trading days. BSESENSEX lost 1,149.26 points or 2.96% to close at 37,673.31 points while NIFTY lost 337.65 points or 2.93% to close at 11,174.75 points. The broader indices saw BSE100, BSE200 and BSE500 lose even more at 3.19%, 3.20% and 3.25% respectively. BSEMIDCAP was down 3.87% and BSESMALLCAP lost 3.92%.
The worst sectoral index was BSEBANKEX which lost 2,478.13 points or 7.34% to close at 31.303.39 points. While the entire sector was under pressure, the smaller private banks bore the brunt of the selling. RBL Bank, YES Bank and Indus Ind Bank lost considerable ground. The BFSI sector too contributed to the downfall of the market.
We have several groups or companies under the radar. On the one hand we have the Wadhawan group whether it is Sarang and HDIL or Kapil and DHFL on the other side. We have Zee where almost the entire holding has been pledged to a Russian Bank. Incidentally this is the same bank which was involved in the take over of Essar Oil. On yet another front we have the India Bulls group with its companies and its ongoing takeover issue of Lakshmi Vilas Bank. With so many issues keeping the bears well fed, market recovery becomes a little more difficult than if it was just a slowdown.
RBI cut repo rates by 25 basis points to 5.15% on expected lines at its monetary policy meeting where all members unanimously voted for the rate cut. The current Repo rate is at a nine-year low.
Response to the Follow-on fund offer from Bharat-22 was excellent. The base offer of Rs 2,000 crs received support for roughly 24,000 crs. The government has decided to allot a total of Rs 5,742 crs in the scheme. They would give shares worth Rs 4,368 crs and the fund manager would buy shares worth Rs 1,374 crs from the market in the above scheme. These shares would have already been bought in the course of the last few days. As a result of this exercise, the discount would reduce from 3% to roughly 2.28%. The shares which would have been bought are of ITC, REC, Engineers India, National Aluminium and Indian Oil Corporation.
The offer for sale from IRCTC (Indian Railway Catering and Tourism Corporation Limited) was a phenomenal success. The company was looking to raise Rs 645 crs from the sale of 2.016 cr shares in a price band of Rs 315-320. It was oversubscribed 111.95 times and garnered support for Rs 72,222 crs. The issue was subscribed 108.79 times by QIB’s, 354.52 times by HNI’s, 14.94 times by Retail investors and 5.82 times by employees. The issue received 14.64 lac applications which considering the change in bidding where the same is done through UPI is indeed commendable. This clearly shows whatever be the state of the market, there is appetite for primary issues at a price.
The second issue from Vishwaraj Sugar Industries Limited was subscribed 1.12 times. The QIB portion was subscribed 1 time, HNI portion was subscribed 1.76 times and Retail portion was undersubscribed 0.64 times. The company had tapped the capital markets with a combined offer which consisted of a fresh issue of 30 lac shares and an offer for sale of 70 lac shares in a price band of Rs 55-60.
These three issues show that there is appetite for new issues provided the price is right. Promoters and merchant bankers must keep pricing attractive to get the issue through. By keeping the same unrealistic and using unfair and underhand means to subscribe the issue does not help anyone, particularly the entity going public.
Results for the quarter July to September 2019 would kick off in this week with TCS announcing them on Thursday the 10th of October and Infosys on Friday the 11th of October. There would be a market holiday on Tuesday on account of Dussehra. The week would see high volatility and take cues from global developments particularly the long-drawn China US trade war which seems never ending. Any positive drivers from quarterly results would be most welcome as the market is starved of positive news. Trade cautiously as markets after a very sharp fall last week are set for some recovery in the week ahead.
