Markets in the week gone by were volatile and choppy. On more than one occasion during the week one saw opening losses being wiped out and similarly profits too being wiped out. At the end of the week, we saw markets gaining on four of the five trading sessions and losing on one. BSESENSEX gained 831.15 points or 1.16% to close at 72,426.64 points while NIFTY gained 258.20 points or 1.19% to close at 22,040.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.26%, 1.23% and 1.08% respectively. BSEMIDCAP gained 0.91% while BSESMALLCAP was up 0.02%. The top sectoral gainer was BSEAUTO which outperformed the broad markets and was up almost 5%. 

The Indian Rupee gained 2 paisa or 0.02% to close at Rs 83.02. Dow Jones was choppy and gained on three of the five trading sessions, losing on two. At the end of the volatile week, Dow was marginally negative, losing 43.70 points or 0.11% to close at 38,627.99 points. 

The week gone by was full of listings and we had as many as five listings during the week. The first was from Apeejay Surrendra Park Hotels Limited which had issued shares at Rs 155. Shares of the company listed on Monday the 12th of February and closed day one at Rs 203.45, a gain of Rs 48.45 or 31.25%. By Friday, the shares lost some ground and closed at Rs 194.70, a gain of Rs 39.70 or 25.61%. 

Wednesday the 14th of February saw three listings and they were certainly not the best that one has seen in a very long time. The first was from RP Tech Limited which had issued shares at Rs 311. The discovered price was Rs 335, a gain of Rs 24 or 7.71%. At the end of the day, the share closed substantially lower at levels of Rs 320.10, a gain of Rs 9.10 or 2.92%. By the end of the week, the share gained substantially and closed at Rs 345.65, a gain of Rs 34.65 or 11.14%. 

The second of Wednesday’s listings was from Capital Small Finance Bank Limited which had issued shares at Rs 468. The discovered price was Rs 435, a loss of Rs 33 or 7.05%. The share slipped further during the day and made a low of Rs 421.10. It recovered from here to close around the open at Rs 436.05, a loss of Rs 31.95 or 6.82%. At the end of the week, the share regained some ground and closed at Rs 449.25, a loss of Rs 18.75 or 4.01%. 

The third of Wednesday’s listings was from Jana Small Finance Bank Limited which had issued shares at Rs 414. The listing price was Rs 396, a loss of Rs 18 or 4.34%. The share lost sharply as the day progressed and made a low of Rs 365. The share closed marginally higher than the low at Rs 366.80, a loss of Rs 47.20 or 11.40%.  During the remaining two days of the week the share regained lost ground and closed at Rs 419.5, a gain of Rs 5.05 or 1.22%.

The fifth and final listing of the week was from Entero Healthcare services Limited which had issued shares at Rs 1,258. The discovered price was Rs 1,245, a loss of Rs 13 or just about 1%. The share closed day one at Rs 1,149.50, a loss of Rs 108.50 or 8.62%.

These four listings show one thing clearly that primary markets are overheated and the valuations which are being asked for are unrealistic in most cases. There is no comfort in the valuations and one bad day at the bourses can knock the company off its pedestal. Time for promoters and merchant bankers to pull up their socks and ensure that they and their clients do not become greedy or it would become a case of the chicken that lays the golden egg being killed. 

There is one IPO from Juniper hotels Limited which is tapping the capital markets. The issue consists of a fresh issue of Rs 1,800 crs in a price band of Rs 342-360. The issue would open on Wednesday the 21st of February and close on Friday the 23rd of February. The company is the only hotel developer which has a 50:50 Joint venture or partnership with a leading global hotel operator and is the only one of its kind in India. Further, there is no investment made by any global hotel operator in a hotel company in India. 

The issue has 75% reservation for QIBs, 15% for HNIs and 10% for retail as the company has not reported profits over the last three years. In terms of revenues, the company reported revenues of Rs 717.3 crs for the year ended March 23 and EBITDA of Rs 327.4 crs. EBITDA margin was at 45%.  The company has earned a negative EPS of Rs 13.88 in FY21, Rs 13.08 in FY22 and a much-improved negative Rs 0.10 for the year ended March 23. The objects of the issue are to repay Rs 1,500 crs towards the company’s debt. This would lead to a profit in the next financial year simply because of interest costs on the retired debt being saved. The company is currently paying about 11% on its debt. Post this payment, one would expect the debt rating of the company to also improve which would lead to savings and hence higher profits. The company is comparable to its peers which include the Chalet Hotels, Indian Hotels, Lemon Tree and East India Hotels. Juniper Hotels is an asset heavy company and owns all the hotels which are currently managed by Hyatt. It would continue this model and remain an asset owned hotel company. It is in the midst of expanding its hotel, Grand Hyatt at Kalina, Mumbai which would become the largest hotel in the country post the expansion. 

Currently the company has 1,836 keys in 7 operating hotels, has a MICE area of 1.27 lac sq ft and commercial space of 1.44 lac sq feet. The company merits subscription looking at the opportunity that exists and the single largest benefits of becoming almost a debt free company post IPO and which has had a global hotel operator as its equal partner for 25 years.   

Coming to the markets in the week ahead, expect markets to remain choppy and volatile. What has happened in the week gone by is the fact that markets have weathered the storm and have made a setup from where the all-time high can be challenged. Whether they will be crossed or not is another question. The setup has become positive and there are possibilities that if the momentum continues, they could be crossed. As is expected in markets when a new high is made, markets become even more volatile and choppy. Already markets are in a choppy condition and with possibilities of new highs they would be choppier and even more volatile. Time therefore to become cautious. Trade with stop losses and refrain from taking large positions. 

The strategy for the week would be to keep one eye on the indices and the other on traded volumes. At around new highs, volumes tend to increase sharply. The direction or trend of markets gives an indication of where they are then headed. Use sharp rallies to sell into the market what you own and refrain from shorting the markets. At the same time use only sharp dips to buy and that too from the large cap space only. 

Trade cautiously.

It was an extremely volatile week in which one saw intraday gains being wiped out as well as opening losses being more than recovered. At the end of it all, markets gained on two of the five trading sessions and lost on three. BSESENSEX was down 490.14 points or 0.68% to close at 71,595.49 points while NIFTY lost 71.30 points or 0.33% to close at 21,782.50 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.22%, 0.34% and 0.22% respectively. BSEMIDCAP was up 1.65% but BSESMALLCAP was down 0.44%. It needs to be mentioned here that intraday volatility and intraweek volatility has increased substantially in the midcap and Smallcap space and the net index changes at the end of the week do not give a fair picture of the volatility. 

The Indian Rupee lost 12 paisa or 0.14% to close at Rs 83.04 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two sessions. At the end of the week, Dow was up a mere 17.27 points or 0.04% to close at 38,671.69 points. 

At the end of the three-day bi-monthly meeting of the monetary policy committee meeting, RBI kept repo rates unchanged at 6.5%. These rates have not been changed since February 2023. 

Markets have become very volatile and are giving some signs of a reasonably large correction happening in the coming period. For the records, the high on the BSESENSEX was made on 16th January at 73,427.59 points and on NIFTY at 22,124.15 points on the same day. In a flash of a pan movement, NIFTY crossed this high by a whisker at 22,126.80 points on 2nd of February. What to make of this is debatable as BSESENSEX made a substantially lower high as compared to 16th January of 73,089.40 points. Looking at the fact that with just the last week left for results of the October-December 23 quarter to be declared, the general summary indicates that the growth in revenue being talked about seems missing. While there have been some outstanding results, the pace of growth in revenues and profits is clearly missing. For the new trend to emerge we will now have to wait for yet another quarter at the bare minimum. This would also coincide with the general elections which would be held in April-May 2024. 

In primary market news we had four issues which closed for subscription during the week. The first was Apeejay Surrendra Park Hotels Limited which had tapped the markets with its fresh issue of Rs 600 crs and an offer for sale of Rs 320 crs. The price band was Rs 147-155. The issue was subscribed 62.90 times overall with QIB portion subscribed 79.23 times, HNI portion subscribed 55.25 times and Retail portion subscribed 31.96 times there were 18.95 lac applications. 

The second issue was from Rashi Peripherals Limited which had tapped the markets with its fresh issue of Rs 600 crs in a price band of Rs 295-311.The issue was subscribed 62.95 times overall with QIB portion subscribed 151.45 times, HNI portion subscribed 66.15 times and Retail portion subscribed 11 times. There were 15.07 lac applications. 

The third issue was from Jana Small Finance Bank Limited which had tapped the capital markets with its fresh issue of Rs 462 crs and an offer for sale of 26,08,629 equity shares. The price band of the issue was Rs 393-414. The issue was subscribed 18.43 times overall with QIB portion subscribed 38.75 times, HNI portion subscribed 25.05 times and Retail portion subscribed 5.46 times. There were 7.04 lac application forms in all. 

The fourth issue was from Capital Small Finance Bank Limited. The company intended raising Rs 450 crs in a fresh issue and an offer for sale of 15,61,329 shares in a price band of Rs 445-468. The issue was subscribed 4.17 times overall with QIB portion subscribed 6.86 times, HNI portion subscribed 4.23 times and Retail subscribed 2.60 times. There were 4.17 lac applications in all. 

The subscription comparison between Jana Small Finance Bank and Capital Small Finance Bank Limited was stark. Both the issues were of similar size, a fairly similar price band and coincidentally in the same business, small finance bank. The valuation and direct comparison resulted in one being well received and doing well and the other just getting subscribed at a time when markets are overflowing with funds. Big learnings for merchant bankers and prospective promoters looking to tap the markets going forward. 

There is one issue in the coming week which has already opened on Friday the 9th of February and will closes on Tuesday the 13th of February. The issue from Entero Healthcare Solutions Limited is tapping the capital markets with its fresh issue of Rs 1,000 crs and an offer for sale of 47,69,475 shares in a price band of Rs 1,195 to 1,248. The company is into the business of distributing healthcare products in India. The company is the third largest in terms of revenues in this space. It distributes pharmaceuticals and also has a range of white label products in healthcare devices and related products which currently form a small part of its overall revenues. The company has been growing its presence in the country by acquiring small well-established distributors across geographies and then converting them into subsidiaries. The idea is to have a well-knit all India presence which uses technology to achieve last mile distribution of these products.

The company achieved revenues of Rs 3,300 crs for the year ended March 2023 and reported a net loss of Rs 11.10 crs for the same period. Revenues for the half year ended September 23 have improved to Rs 1,895 crs and the company has turned profitable for the first time and earned a profit of Rs 11.64 crs. In terms of EPS, as the company has reported losses for the year ended March 23 and therefor the EPS is negative Rs 3.10. The same is positive for the first six months at Rs 2.95.     

The only comparable player in the listed space which has a similar business model in part is Medplus. The other comparable price matrix for companies is price to book. The NAV of the company post conversion of CCCP as at September 23 is Rs 185.84. This effectively means that the company is asking for a price to book of 6.71 times. The business is complex, needs time to stabilise and achieve a decent profitability. Readers could look at the share post listing. 

Coming to the markets in the week ahead, volatility would be the order of the day. On the upside levels of 73,427 on BSESENSEX and 22,126 on NIFTY would be Mount Everest. I believe these need a superhuman effort with massive index management and accompanied by very strong news flow to be taken out. Suffice to say that without consolidation, this is something which cannot happen.  On the support side, levels of 21,500 and 70,750 would act as decent levels where markets would look to bounce. If these are broken, then levels of 21,200 and 69,850 would act as solid supports for the time being. Depending on how markets behave, future movement in key indices would be decided. 

A note of caution would be that there could be a reason for a sharp fall in the markets over a couple of days. This could happen in this week or the next. The trading strategy would continue to book profits on rallies and reduce exposure in the midcap and Smallcap space. Safety lies in the large cap space where buying should be done only on sharp dips. 

Trade cautiously.