Markets continued to drift downwards and lost ground once again on a weekly basis. They lost on two of the four trading sessions of the truncated week which had Independence Day as the holiday. At the end of it all, BSESENSEX lost 373.99 points or 0.57% to close at 64,948.66 points while NIFTY lost 118.15 points or 0.61% to close at 19,310.15 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.68%, 0.65% and 0.61% respectively. The action packed BSEMIDCAP and BSESMALLCAP too lost ground this week and were down 0.54% and 0.02% respectively. 

The Indian Rupee was under pressure and lost 26 paisa or 0.31% to close at Rs 83.10 to the US Dollar. Dow Jones too had a bad week and lost on three of the five trading sessions. It was down 780.74 points or 2.21% to close at 34,500.66 points. What could be interesting to note is the fact that the two days of gains on the Dow were the opening and closing sessions of the week and both days saw gains of an almost identical 26 points. Losses were much bigger at 360 points, 180 points and 290 points. There are concerns in the US about interest rates and the looming downgrade of banks. 

Coming to Indian markets, the benchmark indices have lost ground for a fourth consecutive week. In what could be a precursor for future trends, the midcap and Smallcap which were at the forefront of all action, lost ground this week after being up for seven consecutive weeks. Is fatigue factor setting in? Only the weeks ahead will tell, but certainly it’s a cautionary signal, something not to be ignored.

Primary markets saw two listings in the week gone by. The first share to list was SBFC Finance Limited which has issued shares at Rs 57. The share listed on Wednesday the 16th of August at Rs 81.99 on BSE and at Rs 82 on NSE. The closing price on listing day was Rs 92.21 on BSE, a gain of Rs 35.21 or 61.77%. In the remaining two days the share lost some ground on profit taking and closed at Rs 88.24, still gaining Rs 31.24 or 54.80%. 

The second share to list was Concorde Biotech Limited which had issued shares at Rs 741. The discovered price was Rs 900.05, a gain of Rs 159.05 or 21.46%. As the day progressed, the share gained ground and closed at Rs 941.85, a gain of Rs 200.85 or 27.10%. 

The issue from TVS Supply Chain Logistics Limited which had tapped the markets and closed on Monday the 14th of August received a tepid response, but was oversubscribed 2.84 times. The QIB portion was subscribed 1.37 times, HNI portion 2.44 times and Retail portion was subscribed 7.88 times. There were 3.65 lac applications in all. 

The week ahead sees the issue from Aeroflex Industries Limited tap the markets with its offer for sale of 1.75 cr shares in a price band of Rs 102 to Rs 108. The selling shareholder is SAT Industries Limited which is a listed entity on the bourses. 

The company is into the business of manufacturing and supplying of environmentally friendly metallic flexible flow solution products like braided and unbraided hoses, solar hoses, gas hoses, interlock hoses, hose assemblies etc. About 80% of its turnover is exported to customers in the US and Europe amongst others. The company claims it has no peer group in India. 

It reported revenues of Rs 269.46 crs for the year ended March 23 against the previous year figure of Rs 240.8 crs. The profit after tax was at Rs 30.15 crs against previous year of Rs 27.5 crs. Capacity utilisation has been high and was at over 83%. This limits the growth that the company can achieve going forward without doing capex. The EPS for the year ended March 23 was Rs 2.64. At this EPS, the PE band is 38.63-40.91, certainly not cheap even considering that the company has quoted foreign companies as peer comparison. 

The company had as recently as May and June 23 done a secondary transaction where approximately 87 lac shares were transacted at Rs 87.56. The asking price at the top end of the price band is a steep premium of over 23%. One wonders what has changed that the asking price has moved so significantly. 

The business is good and as mentioned earlier needs investments in capital expenditure to add capacity. Currently the mood of the market is that over and above the issue price, irrespective of valuations there is a healthy grey market active in all issues. This issue is no exception. Apply for listing gains and sell on successful allotment. 

Some interesting data points on the retail participation in markets. New demat accounts opened in July23 were 29 lacs, taking the total to 12.34 cr demat accounts. Of these a staggering 9.07 cr demat accounts or 86% are with CDSL and 3.27 cr or 14% are with NSDL.  

FPI inflows into India in the first four months of the current fiscal are at 18.16 billion US dollars. Similarly, inflows into the capital markets through SIPs and mutual funds continue to be robust. 

Shares of demerged Jio Financial Services Limited would list on Monday the 21st of August and would add some flavour to the market colour. Readers would recall that the discovered price for the same on 20th of July was at Rs 261.65. The share would trade in the T-to-T segment for the next ten trading sessions. 

Coming to the markets in the week ahead, it has become clear that 20K on NIFTY is Mount Everest and will need a superhuman effort to be taken out. Immediate support for markets is at 19,200 on NIFTY and at 64,650 on BSESENSEX. If these levels were to break and trade below them, we could see a sharp fall in the markets. This breakdown could ultimately bring us to levels around 18,600 and 63,000 on BSESENSEX. For this sharp fall, the breakdown must happen first and also sustain. 

The trading strategy for the week would be to remain nimble footed. It is early signs that midcap and Smallcap stocks have run out of steam and are ripe for correction. Use sharp dips to buy select stocks and rallies to sell. 

In conclusion, markets would remain range bound with a downward bias, with a strong possibility of a downward breakdown looming large.

Markets in the week gone by were choppy and volatile. They gained on two of the five trading sessions and lost on three. Mount 20K on NIFTY is looking like an uphill task and markets are just not able to gather enough steam to put in the thrust to surmount the same. BSESENSEX lost 398.60 points or 0.61% to close at 65,322.65 points while NIFTY lost 88.70 points or 0.45% to close at 19,428.30 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.45%, 0.27% and 0.20% respectively. BSEMIDCAP gained 0.88% while BSESMALLCAP was up 0.63%. Action continues to remain focused on midcap and Smallcap space.

The Indian Rupee remained unchanged at Rs 82.84 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two. Dow gained 231.60 points or 1.18% to close at 35,281.40 points. 

RBI in its monetary policy meeting held between 8th and 10th August decided to keep rates unchanged. Repo rate would remain at 6.5% and this would be the third consecutive meeting where the rates would remain unchanged. Inflation is estimated to reach 5.4% and RBI is concerned about disruptions in food supplies for various reasons and the impact it is having on food prices and inflation. 

The week gone by saw two IPOs close their subscription. The IPO from SBFC Finance Limited had opened for subscription on Thursday the 3rd of August and closed on Monday the 7th of August. The issue was subscribed 70.16 times overall with QIB portion subscribed 192.90 times, HNI portion subscribed 49.09 times and Retail portion subscribed 10.98 times. There were 24.29 lac applications. 

The second issue was from Concorde Biotech Limited which had opened for subscription on Friday the 4th of August and closed for subscription on Tuesday the 8th of August. The issue was subscribed 24.86 times overall with QIB portion subscribed 67.67 times, HNI portion 16.99 times and Retail portion 3.77 times. There were 12.84 lac applications in all. 

The issue from Yatharth Hospital and Trauma Care Limited listed on Monday the 7th of August. Shares were issued at Rs 300 per share. The discovered price was Rs 304 on BSE and the closing price Rs 333.75. The gain was Rs 33.75 or 11.25%. The share lost some ground and closed at Rs 330.70, a gain of Rs 30.70 or 10.23%. 

The issue from TVS Supply Chain Solutions Limited opened on Thursday the 10th of August and would close on Monday the 14th of August. The issue would raise Rs 600 crs fresh and Rs 280 crs through an offer for sale. The company is a global integrated supply chain solutions provider. It is India’s largest and among the fastest growing companies having a global presence. It can be best described as an India based multinational company which pioneered the development of the supply chain solutions market in India. The company is promoted by the TVS group having its origin in Tamil Nadu and is a large conglomerate from Southern India. A public issue from this group had last come about 28 years ago. 

One of the customers they serve is an ATM company in Europe. When the ATM is down, it needs to be restored and put back in service at the earliest. The technician visits the location and after checking the machine, orders the defective part replacement on the system. The logistics provider ensures that the required part is delivered to the boot of the technician’s car in the night so that the ATM can be serviced next morning. The same facility has been similarly replicated in India where instead of a car the part may also be delivered to the bike of the technician. Such customised solutions ensure customer stickiness and also results in larger and longer engagements. This was given as an example from the activities that the company does.

In terms of financial performance, the company reported revenues of Rs 10,235 crs for FY23 which was higher by 10.66% when compared with FY22 at Rs 9,249 crs. In terms of EBITDA, the number was 152 crs in FY23 versus Rs 121 crs in FY22. The company reported an EPS of Rs 1.02 on a fully diluted basis for the year ended March 2023. On this EPS, the PE multiple is a staggering 183.33 to 193.14 times. Very clearly a valuation does not inspire to invest. Such companies are valued at EV/EBITDA and here the company scores favourably when compared to its peers with the value being 15.16-15.75 times. 

Going forward one would expect this ratio to improve for the company as revenues and profitability is concerned. If one were to hazard a guess on how revenues could scale up for this company, I believe we could see a rising trend with the current 10.6% growth moving up by a percentage point or better each year to reach around 16-17% in about 4 years’ time. This would correspond to a revenue number of Rs 18,000 crs approximately. EBITDA would improve significantly from the present 6.5-6.6% to around 9% plus. This change would add to EBITDA and the PAT would make the difference as well. 

In conclusion, apply if convinced in the business and the group. This is a business that would take yet another two to three years for delivering fruit, but the path that the company is trending in is successful. Take a measured call by either investing now or waiting for the share to list and then investing. 

At the end of day 2 of subscription the issue was subscribed 1.05 times with QIB portion subscribed 0.15 times, HNI portion 1.05 times and Retail 3.75 times. 

SME IPO has become a pure game of lottery. There was this recent case of an IPO which planned to raise Rs 9.5 crs at a price band of Rs 40-42. The issue size was 21.42 lac shares and the company received subscription of 64.27 cr shares and was oversubscribed 300 times. What is interesting is that besides the other costs, there would be a processing fee cost of approximately Rs 90-100 lacs on the number of applications received by the company and this would reduce the funds raised by the amount. Interesting times in SME and it may be said that when it rains, it pours. The issue in question is Srivari Spices Limited. 

The week ahead has a trading holiday on Tuesday the 15th of August which is India’s Independence Day. This would disrupt trading as global markets are open. This would effectively mean that post the holiday we would have a three-day week. Markets would have 19,600 on NIFTY as a pivot and crossing of this in either direction would make markets move in that direction with some force and speed. This would correspond to 65,800 on BSESENSEX. On the support side, levels of 19,200 on NIFTY would act as support while it would be 64,600 on BSESENSEX. Mount 20K is the target for markets but that has become equivalent to Mount Everest. With results season over there are no immediate triggers in the market place currently. Expect markets to trade in both directions and volatility to rule the day. They would remain range bound in the short term. 

Trade cautiously.