Markets in the week went by shifted gears dramatically from Tuesday and for the next three days there was high speed driving at the bourses. This resulted in big gains and markets touching new levels and more importantly crossing 79K on BSESENSEX and 24K on NIFTY. It also brought to an end the highly volatile month of June which began with election exit polls and then results which saw the biggest upheaval in markets in a very long time. At the end of it all, markets were actually up, having more than regained losses of the 4th of June and seeing big monthly gains. BSESENSEX gained 1,822.83 points or 2.36% to close at 79,032.73 points while NIFTY gained 509.50 points or 2.17% to close at 24,010.60 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.95%, 1.67% and 1.48% respectively. BSEMIDCAP gained 0.42% while BSESMALLCAP was up 0.37%. Markets gained on four sessions in a row during the week and saw profit taking on the last day of the week. Two interesting observations during the week’s trading was the advance decline ratio turning negative even though markets rallied sharply on Tuesday and Wednesday. The other observation was the out of favor IT pack registering sharp gains during the week. 

The Indian Rupee gained 18 paisa or 0.22% to close at Rupees 83.38 to the US Dollar. Dow Jones gained on three of the five sessions. It ended the week with gains of 529.70 points or 1.33% to close at 39,118.86 points. 

Thursday the 27th of June saw June futures expire. It was a volatile day but bulls were fully in control. The series ended with gains of 1,555.75 points or 6.92% to close at 24,044.40 points. It’s been a very successful month for bulls and they have registered more than handsome gains. The month ahead is likely to see the budget being presented in all probability in the week beginning 22nd July. This would be the expiry week for July series with expiry happening on Thursday the 25th of July. This would make that particular week extra volatile and choppy. 

The week gone by saw three primary main board issues list and two issues open and close for subscription during the week The week ahead will see two IPOs open and close during the week with the two IPOs of the previous week listing as well. 

The first issue to list was from Dee from Dee Development Engineers Limited who had issued shares in a price band of Rs 193-203 and had received excellent response and was oversubscribed 102.32 times. Shares debuted at Rs 339 and closed at Rs 335.32, a gain of Rs 132.32. By the end of the week, the share lost marginally and closed at Rs 322.10, a gain of Rs 99.10 or 58.67%. 

The second share to list on Wednesday was Akme Fintrade (India) Limited which had issued shares in a price band of Rs 114-120. The issue was subscribed overall 54.24 times and had issued shares at Rs 120. The share debuted at Rs 127, made a high at Rs 133.35 and closed there. The share gained Rs 13.45. By Friday, the gains were reversed and the share closed at Rs 119.15, a loss of Rs 0.85 or 0.71%. 

The third share to list was Stanley Lifestyles Limited. The company had issued shares at Rs 369 and listing happened on Friday at Rs 499. The share closed day one at Rs 474, a gain of Rs 105 or 28.46%. 

The first issue to tap the capital markets is Emcure Pharmaceuticals Limited which would open on Wednesday the 3rd of July and close on Friday the 5th of July. The issue consists of a fresh issue of Rs 800 crores and an offer for sale of 1,14,28,839 equity shares in a price band of Rupees 960 to 1,008. The company as the name suggests is into manufacturing, marketing and drug discovery. It sells in India and globally. It had some issues in the US and had as a prudent measure demerged the US Subsidiary to safeguard the parent from litigations which may arise. The PE band is at 34-86-36.60 based on annual results for the year ended March 24. The company had reported revenues of Rupees 6,715.12 crores and a net profit of Rupees 527.57 crores. The EPS for the company was Rupees 27.54. The company had a flattish year compared to March 23 as  sales grew from Rs 6,031 crores while net profit for the previous year was higher at Rs 548 crores. The EPS for March 23 was Rupees 29.42. The PE multiple is on comparable levels with its peer set. Investment may be made in the share for the medium term. 

The second share to tap the capital markets is Bansal Wire Industries Limited which is tapping the capital markets with its fresh issue to raise Rs 745 crores in a price band of Rupees 243-256. The issue opens on Wednesday the 3rd of July and closes on Friday the 5th of July. The company is a manufacturer of mild steel high carbon, mild steel and stainless steel wires. It has a capacity of approximately 3 lakh tons and is setting up a new plant with a total capacity of 3.5 lakh tons. The new plant will have within it multiple facilities and has partially been commissioned and would be fully ready in a phased manner over the next 6-8 months. Suffice to say that with the plant coming on stream in a phased manner,  the run rate of production in the next three quarters would have risen to a near optimum even though cumulatively for the year it would be lower. 

The company reported total revenues of Rupees 2,470 crores and a net profit of Rupees 78.79 crores. This translated into an EPS of Rupees 6.18 for the full year and a PE multiple of 39.32-41.42. There would be significant improvement on these numbers as the new capacities ramp up as there are economies of scale, better and modern machines with larger capacities and a mix of value-added products.  All of this would help in increasing margins at all levels whether it be gross, EBITDA or net. Investment in the issue should be for a medium to long-term looking at the prospects. One can also look at a short-term punt with listing day objectives. 

Coming to the markets in the week ahead, one should see volatility increasing. The fact that markets have reached crucial and expected levels of 24K on NIFTY and 79K on BSESENSEX, gives one the belief that more is in store. Another 500 points on NIFTY and roughly 1,500 points on BSESENSEX open up as targets and upper resistance levels. The possibility of midcap and small cap showing fatigue and a feeling of rising too much and too fast was clearly visible last week. There is likely to be a correction in these segments and one will find different stocks behaving differently. Budget is just about three weeks away and expectations will start building up, keeping the market glued onto happenings. Sector rotation would be the key and wherever one finds sharp movements, the three day theory must be kept in mind. You must enter on the first day and look to get out on the third day before the correction sets in and stocks are distributed. 

The strategy for the week ahead would be three-fold. Firstly, book some profits and take some money off the table. Secondly concentrate on large cap stocks and exit small cap and midcap stocks. Thirdly or finally look for sectors which create new movement for the quick entry and exit strategy. Finally, as we get closer to budget, expect sharper two-sided moves in the markets. 

Trade cautiously.

Markets were open for four trading sessions in the previous week as there was a trading holiday on Monday. They were a little volatile but managed to close with small gains. There has been sector rotation with banking being in the forefront on Wednesday led by sugar stocks and then fertilizer and finally railway stocks. What could be a cause of concern going forward is the volumes in the fertilizer stocks when they gained sharply. BSESENSEX gained on three of the four sessions while it lost on one. NIFTY on the other hand gained on two and lost on two sessions. At the end of the four-day week, BSESENSEX gained 217.13 points or 0.28% to close at 77,209.90 points while NIFTY gained 35.50 points or 0.15% to close at 23,501.10 points. The broader markets saw BSE100 and BSE200 lose 0.04% and 0.14% respectively while BSE500 gained 0.04%. BSEMIDCAP was down 0.20% while BSESMALLCAP was up 1.44%. The pace at which the BSESMALLCAP and BSEMIDCAP indices have risen is a cause for concern and yet another fund house has raised valuation concerns in these segments.  

The Indian Rupee gained 3 paisa or 0.04% to close at Rs 83.53 to the US Dollar. Dow Jones gained on all four trading sessions of the week and gained 561.17 points or 1.45% to close at 39,150.33 points. 

In primary market news, we had one listing, two issues opening and closing for subscription while yet another issue had opened and would close in the following week. Two new issues would open and close in the coming week. 

The issue from Le Travenues Technology Limited who had issued shares at Rs 93 debuted on Tuesday, the 18th of June. Shares closed day one at Rs 161.99, a gain of Rs 68.99 or 74.88%. By weekend, the share gained further and closed at Rs 169.18, a gain of Rs 76.18 or 81.91%. 

The issue from Dee Development Engineers Limited who had issued shares in a price band of Rs 193-203 received excellent response and was oversubscribed 102.32 times. The QIB portion was subscribed 206.54 times, the HNI portion subscribed 148.99 times and the Retail portion subscribed 23.21 times. There were 20.61 lakh applications in all. 

The second issue was from Akme Fintrade (India) Limited which had issued shares in a price band of Rs 114-120. The issue was subscribed overall 54.24 times with QIB portion subscribed 28.12 times, HNI portion subscribed 129.79 times and Retail portion subscribed 44.14 times. There were 12.07 lakh applications. The QIB portion response was comparatively muted if one looks at other issues and even the HNI response in this issue. This was probably because the company has higher NPA’s and is in a competitive landscape environment in the NBFC space. 

The third issue was from Stanley Lifestyles Limited which opened on Friday and would close on Tuesday the issue was subscribed 1.44 times on the first day. The price band is Rs 351-369. 

The week ahead sees the issue from Allied Blenders and Distillers Limited open on Tuesday the 25th of June and close on Thursday the 27th of June. The issue consists of a fresh issue of Rs 1,000 crores and an offer for sale of Rs 500 crores in a price band of Rs 267-281. The company has a distillery in the state of Telangana and 32 bottling plants across the country. Its brand ‘OFFICERS CHOICE’ has been the world’s largest selling whisky by volume during 2016-2019. 

The company has been under stress and is raising money through the IPO to retire debt to the extent of Rs 720 crores. Further, prior to going public, the promoter has rationalized the board and separated ownership and management. The new board is entirely professional and would entail a saving of Rupees 93 crores in terms of compensation to promoters going forward. The repayment of interest and this compensation would entail a total saving of over rupees 200 crores in the financial year ending March 25. This would change the financials of the company which has just about been positive. Considering the infrastructure, prospects post rationalization and improvement in margins, it appears an investment which is warranted considering rising demand, socio-economic acceptance of liquor and growing aspirations.  

The second issue is from Vraj Iron and Steel Limited which is tapping the capital markets with its fresh issue of Rupees 171 crores in a price band of Rs 195-207. The issue opens on Wednesday the 26th of June and closes on Friday the 28th of June. The company manufactures M S Billets and TMT bars and uses the sponge iron route for doing so. It is located in Chhattisgarh and has its plants at Raipur and Bilaspur. To better use the flue gas, it has a waste recovery plant and generates power which helps in reduction of cost. The object of the issue is to raise money for expansion of sponge iron capacity and MS Billets at Bilaspur and repayment of loan taken from bank for funding this project in the interim. 

The issue is attractively priced and offers scope for appreciation in the medium term. There could also be listing gains looking at the market mood. 

The week ahead sees June futures expire on Thursday the 27th June. The current value of June series at 23,501.10 points is 1,012.45 points or 4.50% higher than the start of the series. Bulls are very well placed currently and have the upper hand considering we have a mere four days to expiry. Even though markets seem to be tiring out and are finding it difficult to hold on, the momentum and the fact that it’s a mere four days to go, would ensure that they win the series. They may at best concede some ground. One needs to remember that FPIs have been covering their shorts this series after the results of the general elections were announced on 4th June. 

Markets seem to be trading in a broad range where 23,650-23,700 is a top at the moment on NIFTY and 22,800-850 a bottom. These levels seem difficult to be taken out currently and it should be a tough time to break out. The biggest driver in the immediate future is the budget which could happen during the period 18th-23rd July. This event has the potential to make the markets break in either direction. 

The strategy for the week ahead would be to remain cautious with expiry happening. The bears led by FPIs will try to bounce back to the extent possible. Further there would be little or no news flow as well. Sector rotation is already happening and new stock ideas are difficult to come by. In such a scenario its advisable to play safe and take some money off the table. Keep the money aside for a day when new ideas emerge. 

In conclusion, trade cautiously in a week where volatility is likely to rise on account of expiry as the bulls and bears intensify their action.