Global markets had a field day on Friday, the last trading day for the month of January and there were various factors which supported the same. They helped markets to close in positive territory for the week but not enough to negate the terrible January month. The BSESENSEX gained 400 points on Friday, but ended the week with a net gain of 435.03 points or 1.78%. Similarly NIFTY’s Friday gain was 140 points and weekly a mere 141.10 points or 1.90%. The Dow Jones fared similar gaining about 400 points on Friday but the weekly gain 372.79 points or 2.32%.
Some of the drivers for the rally were Bank of Japan cutting interest rates to negative which means one will have to pay to keep money in a bank. The central bank wants the company to have an inflation of 2% and it says will do whatever is required to achieve it. Similarly ECB is contemplating to reduce rates further and if necessary go to zero and then negative. Such measures which seem drastic are done at times when things are in a bad shape. The euphoria is fine but is it sustainable?
Wonder what our central bank Chief Raghuram Rajan would do on Tuesday when RBI meets for its monetary policy review for the first time this calendar year. Our PSU banks are yet to declare results even though the first month or 2 of the 3 fortnights for declaring results are over. Not sure whether the delay is indicating the likely stress in results or its merely waiting for RBI policy.
The first IPO where it was mandatory for even retail investors to apply through ASBA closed on Friday being subscribed 1.92 times. Precision Camshafts saw its retail portion being subscribed 2.01 times which was creditable in the given circumstances. The bulk of these retail applications would get blocked in the next two days and it would be interesting to see how many applications are rejected on technical grounds or non-acceptance by the banks concerned. I would not be surprised if about 15000-20000 applications are not matched for various reasons, like signature mismatch, non-acceptance or broker/syndicate member unable to reach the designated branch.
This week yet another IPO from TeamLease Services Limited opens on Tuesday the 2nd of February and closes on Thursday the 4th of February. The price band is Rs 785-850 and the combined offer size 51.30 lac shares. At the top end of the band the company which is into the staffing business would raise Rs 436 crs. Considering the business model the issue looks expensive but the fact that this is the first of its kind company going public, the same would get subscribed. Secondly due to lack of profit criteria the company is a compulsory QIB issue where 75% of the book is reserved for them. The issue needs 90% to be subscribed. Therefore if the company needs 75% from QIB’s why not market it as 1.2 times minimum oversubscription from QIB and the issue is through. There are a couple more of such businesses in the process of filing for IPO.
January NIFTY futures expired on Thursday at 7,424.65 points, a series loss of 521.70 points or 6.57%. Commodity prices continue to be under stress and contrarian bets are being placed on oil rallying from these levels. If liquidity is continuously pumped as indications exist, there is a possibility that the excess funds move towards speculation in crude. There is already a crisis brewing in the copper market where large international commodity players have borrowed against their holding of copper which is under pressure and also far in excess of demand. This demand has further reduced with the China slowdown and one cannot asses when demand would pick up.
The week ahead would continue to see volatility and would be driven by global factors and also results which so far have not provided much to cheer. RBI is widely expected to keep rates unchanged but could provide an unexpected and pleasant surprise. Trade cautiously and in general be wary of midcap and smallcap stocks which seem to be going all over the place.
