Markets are off to a flyer in 2013 and have gained in all four trading sessions of the year. The secondary has seen across the board gains in almost all sectors and the gain has been reasonable. The SENSEX gained 321.37 points or 1.65% while the NIFTY gained 111.05 points or 1.88%. The broader indices all fared better than the benchmark indices. Of particular interest is the BSEMIDCAP which gained 2.83% and 3.19%. The markets are trading at levels last seen in January 2011 and are now just about 7% away from its all-time high made in January 2008. Its five years and there is a strong probability that we may make a new high shortly.
The best possibility of the time for the same is between now and before the budget session begins. The key driver would continue to be the strong FII flows which touched the 1.30 lac cr mark in calendar year 2012. The liquidity factor would get strengthened if retail investors join the party as well as this section has generally stayed away from markets for quite some time now. The possibility of them joining is if the midcap and smallcap segments where they have invested starts performing and gives returns. The first signs of that have begun.
The second sign of interest is successful IPO’s or primary market. December has been a decent month for the same. There were three IPO’s which came in that month with all three of them listing in the last week of December and also the last week of calendar year 2012. While CARE and PC Jeweller have done well since listing and are now trading at a premium of over 24% and almost 39%, BhartiInfratel continues to trade at a discount. The heartening fact for our study is that retail did not subscribe to their entitlement and they subscribed to a mere 19% of the retail quota. In the case of Tara Jewels which had launched its IPO in November and listed in December, the share after struggling for quite some time has managed to trade above par and is currently at 2% premium to the issue price.
The government too has done its wee bit for improving the investor confidence by pricing the OFS of NMDC at a reasonable price. One is not sure whether this should be treated as a one off or is an indication of things to happen going forward. The floor price was fixed at Rs 147 and shares were allotted around Rs 149 upwards. The share since then has been trading upwards and the stock price is now in the region of Rs 162-165.
The season of tax free bonds is currently on and a total of Rs 60,000 crs is proposed to be raised through these bonds. The issue from IIFCL is currently open alongwith that from Hudco scheduled to open from Wednesday the 9th of January.Issues from REC and PFC have already been completed, but they both failed to raise the overall amount which they intended to raise. Next week is likely to see the bond issue from IRFCL opening. There have been two reasons for bond issues not doing well this time around. The first and more obvious reason is the fact that the coupon rates have come down and the difference in coupon rates between retail and non-retail is now 50 basis points. Secondly the market rates of bonds with a higher coupon rate issued in the financial year 2011-12 are available at better yields than the ones being issued currently for the non-retail category. It is quite surprising to note that the street expects RBI to cut interest rates this review meet on the 29th of January and yet bond sales are not picking up? I am sure there would be an explanation available at a later date to explain this strange event.
Coming back to the secondary markets, I believe that we have enough steam left in the markets currently and even though the fundamentals do not justify the market behaviour, we are likely to continue to be bullish and move from a state of optimism to irrational exuberance in the next three to four weeks.
Enjoy the rally and make money but use stop losses judiciously.
