The week gone by began with a bang, but midweek saw the gains being surrendered and markets flat. Thereafter we saw markets break support levels and recover some lost ground. In the process we have violated important support zones at 24,700-800 points on NIFTY and markets are looking vulnerable at present levels. Markets lost on three of the five trading sessions and gained on two which happened to be on the opening and closing days of the week. BSESENSEX lost 156.61 points or 0.19% to close at 81,224.74 points while NIFTY lost 110.20 points or 0.44% to close at 24,854.05 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.69%, 0.78% and 0.74% respectively. BSEMIDCAP lost 1.01% while BSESMALLCAP was down 0.18%. The lows made on Friday, were at 80,409.25 points on BSESENSEX and at 24,567.65 points on NIFTY. 

The Indian Rupee remained unchanged at Rs 84.06 to the US Dollar. Dow Jones gained on four of the five trading sessions and lost on just one. It was up 412.05 points or 0.96% to close at 43,275.91 points. 

The largest ever IPO in India till date was from Hyundai Motor India Limited. It opened and closed during the week gone by. The issue was an offer for sale of 14.22 crore shares in a price band of Rs 1865-1960. The issue was subscribed overall 2.37 times with QIB portion subscribed 6.97 times. The non-institutional portion comprising HNI was undersubscribed at 0.60 times while Retail was subscribed 0.50 times. The employee portion was subscribed 1.74 times. There were 21.52 lakh applications received in all. The general feeling about the issue was that the promoters have left nothing on the table and priced it very stiffly. The issue would be listing on Tuesday the 22nd of October and one wonders what the listing has in store. 

The week ahead sees a couple of big-ticket IPOs opening. The first of the block is Waree Energies Limited which is tapping the markets with its fresh issue of Rs 3,600 crores and an offer for sale of 48 lakh shares in a price band of Rs 1,427-1,503. The issue opens on Monday the 21st of October and closes on Wednesday the 23rd of October. The company is a large manufacturer of solar modules and has a capacity of 13.3 gigawatt currently which would be expanded by setting up a greenfield plant in Orissa of 6 gigawatt and 1.6 gigawatt in the US subsidiary. Further the company is backward integrating into solar cell capacity of 5.4 gigawatt which would be operational in a phased manner over coming 6 months and an additional 6 gigawatt at Orissa. The Orissa plant is expected to be commercialized in 36 months. The company will also make ingot wafer of 6 gigawatt estimated to start by fiscal 2027. The company has a proven track record and has a reasonable size and scale in the business. 

The grey market has a price which is equal or thereabouts to the issue price. Applying for the issue for listing gains is warranted but whether one would like to hold thereafter is a personal call as valuations at that point will no longer be cheap. 

The other large issue is from Afcons Infrastructure Limited which is tapping the capital markets with its fresh issue of Rs 1,250 crores and an offer for sale of 4,180 crores in a price band of Rs 440-463. The issue would open on Friday the 25th of October and close on Tuesday the 29th of October. The company is part of the Shapoorji Pallonji group and is into the business of engineering and construction company. They have done many prestigious and critical projects in India and abroad. Most recently they have built the world’s tallest single-arch railway bridge over river Chenab in J&K. Notably they have also built the Atal Tunnel in Himachal Pradesh which is the world’s longest highway tunnel above 10,000 feet (3,000 meters). They have execution skills, capabilities and equipment to handle almost anything. The price at which the shares are being offered are attractive and there is money on the table for the investors for the short, medium and long term. 

The third and final issue is from Godavri Biorefineries Limited which is tapping the capital markets with its fresh issue of Rs 325 crores and an offer for sale of 65,26,983 shares in a price band of Rs 334-352. The issue would open on Wednesday the 23rd of October and close on Friday the 25th of October. The company is into the business of ethanol-based chemicals. The company’s portfolio consists of bio-based chemicals, sugar, different grades of ethanol and power. None of the businesses are dominant or large and are a combination with almost equal contibution. While the sweet spot is the bio chemicals based on ethanol, the scaling up of the same is some time away. At current capacities and valuation, the company does not offer investors anything which makes the issue attractive or a must apply.  The PE at which the issue is priced at is a steep 113.99-120.14. Competitors as mentioned in the RHP are available at a much lower multiple. Some of these peers include Alkyl Amines, Jubilant Ingrevia, Laxmi Organic and Triveni Engineering. 

Coming to the markets in the week ahead, expect markets to remain volatile and choppy. We have just survived a scare when we were seeing the markets break down on Friday. Thank God we saw a sharp pull back which ensures that we live to fight another day. The broad band that we were trading in of 24,700-750 on the lower side and 25,300-400 on the upper side, has been broken. The lower end would now shift to 24,400-450 and this would be probably a final support which if broken could bring us to around 24,000. Similar levels on the BSESENSEX are at 80,650-800 points on the lower side and 82,450-750 points. This would now shift to 79,800-950 points. With FPI selling continuing, one is not sure what is it that they have in their mind about India. This remains a cause for concern as much as geo-political cues globally are. 

With results season on, the picture is not the best one could have hoped for. There is pressure and its time to be cautious in the market place. Listing and performance of the largest ever issue in the Indian markets, will have a bearing on markets. Trade cautiously. 

The week gone by was topsy turvy but showed signs of consolidation after the sharp fall witnessed over the previous week. Markets gained and lost and ended with two days of gains and three days of losses. BSESENSEX lost 307.09 points or 0.38% to close at 81,381.36 points while NIFTY lost 50.35 points or 0.20% to close at 24,964.25 points. The broader indices like the BSE100, BSE200 and BSE500 gained 0.01%, 0.20% and 0.30% respectively. BSEMIDCAP was up 1.11% while BSESMALLCAP gained 1.17%. 

The Indian Rupee lost ground and was down 9 paisa or 0.11% to close at Rs 84.06 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two sessions. It was up 511.11 points or 1.21% to close at 42,863.86 points. 

RBI in it’s bi-monthly meeting kept policy rates unchanged. This was the 10th consecutive meeting where rates were kept unchanged. The stance at the meeting is now hinting that there could be some softening of rates in the December 24 meeting if inflation remains at similar or lower levels. 

FPIs have in the month of October sold equity worth Rs 58,711 crores so far. It’s a massive number and explains the fall in the market as well. China was expected to announce some stimulus over the weekend which has not met market expectations. One may expect that post this event the massive selling witnessed in Indian markets may take a back seat. If this were to happen, domestic funds who are not only flush with funds but have been matching FPI selling with buying, may actually press the pedal and buy aggressively. If this were to happen, one may see the markets seeing some buying and helping them regain partially lost ground. 

The week ahead sees the largest ever IPO hit the market. The issue from Hyundai Motor India Limited is tapping the capital markets with its offer for sale of 14,21,94,700 equity shares in a price band of Rs 1,865-1,960. The issue would garner Rs 27,870 crores at the top end of the price band, way above what has been talked about from the time that the company planned and filed its DRHP.  This number hovered around Rs 24-25K.

The fact that the grey market premium was being quoted in the region of Rs 700-725, brought a big smile on the faces of the merchant bankers and the promoters of the company, and they felt it appropriate to charge higher from the issue which is entirely an offer for sale issue. In doing so, they achieved two things. Firstly, the issue size went up by about Rs 3,000 crores. Secondly, the premium of around Rs 700 is now way below Rs 100. Clearly the market in what is being termed as the largest issue ever, investors expect to have listing gains and if the company thinks that everything should be earned by them, they are surely mistaken. 

The anchor would be available late on Monday night and it would be very important to note whether the same is FPI driven or there is a fair share of domestic institutions and participation as well. 

Coming to the company, Hyundai hovers between the second and third largest automobile manufacturer in the company after Maruti and Tata Motors. They have a single location plant currently at Chennai and have a capacity of 8.24 lakh cars per annum. They are in the process of setting up a new plant at Talegaon near Pune which would have an initial capacity of 2.5 lakh cars. The plant is running at near optimum capacity and roughly 80% of its production is sold domestically while 20% is exported. The company enjoys better margins than Maruti, simply because Hyundai never made entry level cars like Maruti-800, Alto and Wagon-R which were the mainstay for Maruti in the initial years. This helps Maruti capture the lion’s share of market but affects the margin. In the case of Hyundai, they don’t have such products and therefore earn higher margins. 

With lack of capacity and new plant about 15 months away, the company will struggle with growth and market share. The PE multiple is comparable with Maruti but the discount not sufficient considering they are the market leaders and dominant players. Finally, there is a global discount that Korean products are available at when compared with Japanese products. 

Considering the present pricing, lack of adequate capacity, higher pricing and sharp drop in grey market premium, the issue looks expensive from the listing day and short term prospects. Readers should invest only for the long term and may take that call even after listing. 

Coming to the markets in the week ahead, we seem to be trading in a broad band of 24,700-750 on the lower side and 25,300-400 on the upper side. Similar levels on the BSESENSEX are at 80,650-800 points on the lower side and 82,450-750 points. Markets need to break out of the upper range for a meaningful rally and a breakdown from the lower level if we are to fall further. The course of direction will be decided by the upcoming quarterly results and what FPIs do in the coming days. As a strategy it makes sense to move to the large cap stocks as the volatility there is better contained and you have options to hedge yourself. 

Trade cautiously.