The short week saw some recovery and indices gained to end the financial year 2017-18 on a positive note. The week saw the BSESENSEX recovering lost ground and gained 372.14 points or 1.13% to close at 32,968.68 points while NIFTY gained 115.65 points or 1.14% to close at 10,113.70 points. Dow Jones had a strong recovery and was up 569.91 points or 2.36% to close at 24,103.11 points.
As far as the year was concerned it was great going till the end of the 10th month i.e. 29th January 2018 and then all hell broke loose. We lost over 10.5% from the highs made on that day but managed to close the financial year with better than average gains of 11.3% on the BSESENSEX and 10.24% on the NIFTY. Dow on the other hand gained 16.64% in the same 12-month period.
Talking of extreme volatility which we are witnessing, there is an interesting data point sent by my friend which says that S&P 500, which is a very stable index has in the first quarter of 2018 already seen 23 days when the movement has been greater than 1% in either direction. This has not happened since 2011. Coming back to my observations over thirty years that I have spent in the markets, is that extreme volatility is a sign of nervousness. Take it whichever way you like or suits you, volatility is currently part of our lives.
March futures expired with some recovery of lost ground to close with a net loss of 269 points or 2.66%. This was a recovery of over 115 points in the short three-day trading week that we had.
In primary market news the issue from ICICI Securities had to struggle to get subscription. The offer for sale did not get the full subscription and closed with a collection of just 0.78 times. QIB portion was subscribed 1.04 times, HNI at 0.35, Retail at 0.88 and shareholder reservation at 0.34 times. The company should have sensed the sentiment prevailing and priced the issue more reasonably. Valuations were extremely high and this is after they underwent a downward correction since filing for DRHP.
Similar was the fate of the issue of Lemon Tree Hotels Limited which scraped through on the back of support from QIB’s. The issue was subscribed overall 1.19 times with QIB portion subscribed 3.89 times and HNI and Retail a mere 0.12% each. Clearly the non-institutional category had no interest in the issue whatsoever. Wonder why the issue came under 26 (1) of the ICDR Regulations when it was an apt case for 26 (2). This option being used by merchant bankers is causing damage to capital markets.
Two issues listed during the short week. The first was from Bandhan Bank Limited which was off to a flyer and gained about 7.25%. The second listing was from PSU aircraft maker HAL which debuted with losses of about 7%. Interestingly Psu HAL chose to price the issue at the lower end of the band as the issue was not fully subscribed. The price band was Rs 1215-1240 and the issue was priced at Rs 1,215 with a discount of Rs 25 to retail investors and employees. Similar was the case with Mishra Dhatu Nigam Limited which has priced the issue at the lower price of the band of Rs 87-90 at Rs 87.
One wonders whether ICICI Securities would follow suit with subscription of just 78% in the price band of Rs 519-520. The band is so narrow that it hardly matters, but it sends a strong signal. Following the lead taken by the Psu companies it should be done. Incidentally there is a common banker in the case of ICICI Securities and the two Psu companies who incidentally is also a Psu banker.
The week ahead would see the listing of Sandhar Technologies, Karda Construction, Mishra Dhatu Nigam, ICICI Securities and Lemon Tree. This would conclude the bunched-up issues that came in the last fortnight of March.
RBI meets on Tuesday and Wednesday for the first review meeting of the Monetary Policy committee. It is widely believed that rates would remain unchanged but the stance could be hawkish indicating that if inflation does not remain under check there could be a rate hike sooner than later. Further US Fed has hiked interest rates recently and indicated that more are to follow.
Talking about the issue of NPA’s, it’s become a fashion to blame anything that turns bad or NPA on the present Prime Minister irrespective on who or when the loan was given. The latest in point is the issue of ICICI Bank and Videocon which was sanctioned in 2012 and has been raised with the spouse of the present CEO of ICICI Bank. There may be truth in the allegation but it was the UPA which was ruling the country and there was no way that the current PM would have been involved in the sanction. Its all about politics and with general elections about 13-14 months away its bound to turn nasty, dirty and no holds barred contest.
The mood is likely to turn better simply because LTCG is now a thing of the past. Results in the quarter January to March 2018 are expected to be better and markets live on hope. With this is mind there would be optimism in markets in the coming week.
Begin the new year on a positive note with a fresh thinking and new mindset. Look for buying opportunities.
