Markets were in a corrective mode last week and the bulls which had a clear advantage going into the home run as far as October futures were concerned, surrendered a part of their gains. The futures series expired at 8,111.75 points up 243.25 points or 3.09%. The markets lost between 2.75% and 3% and these losses are primarily on account of poor numbers from the heavyweight stocks. ITC and Larsen & Toubro were two stocks which lost over 6% each on this count. The expected turnaround seems to be lagging behind. The Fed in its meeting has more or less indicated that there would be a raise in interest rates in the December meeting and it would be interesting to see as and when it happens how the markets react. Also China’s reaction to the same would be keenly watched.

In primary markets the two issues were more than fully subscribed. In the case of Interglobe Aviation, the issue was lapped up by QIB’s and on the last day HNI’s chipped in as well. The retail portion remained undersubscribed but that does not make much of a difference. The surprising bucket was the employee quota which was subscribed a mere 13% even though they were offered a 10% discount. Normally employees are the biggest ‘insider’ source and one wonders whether there is something which they know and others don’t. In a case of perfect timing the issue closed and the draft aviation policy was announced which by and large is airline industry and passenger friendly. The government wants to develop the infrastructure and ensure better connectivity.

The second issue from S H Kelkar was lapped up quite easily. The HNI’s took a fancy for it and it was subscribed 87 times. Even though the interest rates for the leveraged investor have come down to between 6 and 6.5%, the current cost of finance would ensure a substantial degree of comfort for retail investors. The leverage cost would be in the region of Rs 20-22 which is 11 to 12% of the issue price. To some extent the HNI provides the froth to any issue as his interest typically ensures comfort to the retail investor. In how many issues he (HNI) makes money is an altogether different question.

Shares of cafe owner CCD, Coffee Day Enterprises would be listing on Monday. The issue was undersubscribed by HNI’s and Retail and rode on the QIB bids. The listing would indicate who was right in terms of valuation. The success of this would give strength or otherwise to the pipeline of issues waiting to tap the capital markets.
On the domestic front the markets would await election results from Bihar due next Sunday the 8th of November. In normal circumstances one state would have made little or no difference but with the present state of politics where things are log jammed in Parliament this result could be a game changer. A win for the NDA would probably help in Parliament functioning better as the “Mahagathbandhan” would have suffered. On the other hand a defeat for the NDA would make matters worse in the house and all reforms no matter how important they are would take a back seat.

So much for today and more next week.