The Diwali week continued bringing good tidings for investors and Dalal Street even after ‘Muhurat’ trading on Sunday the 12th of November. The week saw gains on two of the four trading sessions but the weekly gains were much bigger than what two day of gains and two days of losses would indicate. The moot point of discussion now would be how much more and how long. We will try to attempt to answer this later in the article but it would only be in part as the subject is too complex.  The week ended with BSESENSEX gaining 890.05 points or 1.37% to close at 65,794.73 points, while NIFTY gained 306.45 points or 1.58% to close at 19,731.80 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.65%, 1.84% and 1.96% respectively. BSEMIDCAP gained 2.5% while BSESMALLCAP was up 3.18%. 

The Indian Rupee recovered 7 paisa or 0.08% to close at Rs 83.27 to the US Dollar. Dow Jones had yet another stellar week and gained on four of the five trading sessions. It lost on just one session. Dow Jones gained 664.18 points or 1.94% to close at 34,947.28 points. 

Markets are at some sort of crossroads currently. They are being powered by the midcap and Smallcap space which seems irrational and also leads one to believe that at some point this would lead to over exuberance. On a Samvat-to-Samvat basis, the out performance was more than three times, something which has to stop and correct at some point of time. Currently the two heaviest of stocks in the benchmark indices, Reliance Industries and HDFC Bank seem as if they are in hibernation. Further the IT pack which saw some sort of recovery last week still seems to be under pressure. To add to the woes of the benchmark indices, RBI raised the risk-weight from 100% to 125% on consumer credit. This will make an impact on cost of funds in the short term and impact general cost of borrowing for the entire banking industry in the medium term. While the measure is welcome as questions were raised about consumer credit and impact on some of them turning delinquent. This move will impact banking industry performance in the short to medium term. Bank NIFTY was one sore point in the rally last week.

Suffice to say that there would be pressure on the benchmark indices in the immediate short term with so many non-performing stocks. To expect this to be replaced by movement by midcap and Smallcap stocks would be out of place. Expect therefore that there could be a sideways movement for some time. Impact of results of five state assemblies to be declared on 3rd December would have a knee jerk reaction at best. 

We have five primary market issues opening and closing in the next five days. While the first would open on Tuesday and close on Thursday, the remaining four would open on Wednesday and close on Friday. This would affect the liquidity in the market for a week as people look to apply for these issues. 

The first issue is from Indian Renewable Energy Development Agency Limited, a PSU enterprise which is tapping the markets with its fresh issue for 40.31 cr shares and an offer for sale of 26.87 cr shares in a price band of Rs 30-32. The issue opens on Tuesday the 21st of November and closes on Thursday the 23rd of November. The company as the name suggests is the nodal agency for Renewable energy and has financed multiple projects from the full value chain. Its AUM is Rs 47,500 crs as of 30th September 23. The company has GNPA of 3.21% and NNPA of 1.66%. The shares are being offered at a price to book of 1.15-1.23. The EPS for the year ended March 23 is Rs 3.78. The PE for the company is 7.94-8.47. The company compares favourably with PFC and REC. Investment makes sense in the company and it offers scope for appreciation in the short and medium term. 

The second issue is from Tata Technologies Limited which is tapping the capital markets with its secondary offer of 6.08 cr shares in a price band of Rs 475-500. The issue would open on Wednesday the 22nd of November and close on Friday the 24th of November. This being an entirely offer for sale, there is no object of issue. The company derives revenues from its services business and automobile business engineering. It has now been approved for the aerospace business vertical and is now working very closely with Airbus. Revenues from the aerospace industry would be visible from the financial year 2024. The company is a leading player in the EV segment and has helped many companies globally to launch EV, re-engineer ICE to EV and also assist in the role of EV as the way forward. The company reported revenues of Rs 4,414 crs for the year ended March 23 and Rs 2,526 crs for the six months ended September 23. It has a PAT margin of 14.14%. The EPS for March 23 was Rs 15.37. The PE multiple at the price band is 30.90-32.53. The issue is attractively priced, offers scope for appreciation in the short to medium term. The size of the issue is relatively small at just about Rs 3,000 crs. The hype about the issue, will leave many investors dissatisfied about the non-allotment. In any case an investment which must be made. 

The third issue to tap the market is from writing instruments maker, Flair Writing Industries Limited which is tapping the capital markets with its fresh issue of Rs 292 crs and an offer for sale of 301 crs in a price band of Rs 288-304. The issue would open on Wednesday the 22nd of November and close on Friday the 24th of November. The company makes writing instruments and is a market leader, having brands such as Flair, Hauser and Pierre Cardin. It reported revenues of Rs 942 crs for the year ended March 23. It is also in the business of consumer homeware and makes plastic products. Its closest competitor would be recently listed Cello World who has the plastic business as its dominant business and the writing instruments as accounting for about 15%. Here the case is the opposite where the dominant business is writing instruments. The company enjoys best in class net margins which are just short of double digit. The company reported an EPS of Rs 12.66. Based on this EPS, the PE multiple is 22.75-24.01 for the issue. Looking at the success of Cello World and the similarity in business, the issue would do well and offer scope for appreciation in the short to medium term. Yet another investment that is justified. 

The fourth issue to tap the markets is Gandhar Oil Refinery (India) Limited which is tapping the capital markets with its issue in a price band of Rs 160-169. The issue consists of a fresh issue component of Rs 302 crs and an offer for sale of 1.17 cr shares. The issue would open on Wednesday the 22nd of November and close on Friday the 24th of November. The company is the largest producer of white oils in the country and reported revenues of over Rs 4,000 crs for the year ended March 23. The company supplies its products to companies in the personal care, healthcare industry and performance oils. It has its plants in Maharashtra, and Sharjah in UAE. The company reported an EPS of Rs 23.77 for the year ended March 23. Based on this EPS, the PE for the issue is 6.73-7.11. The PE is indeed attractive and offers scope for appreciation in the short to medium term. The company would grow in the segments where it is a significant player and better utilising its Sharjah capacity which is a new plant and yet to reach full utilisation. Further the objects of the issue include capacity expansion which would lay the roadmap for further growth as the Maharashtra plant capacity is close to being fully utilised at 95%. 

The fifth and final issue is from Fedbank Financial Services Limited which is tapping the markets with its fresh issue for Rs 600 crs and an offer for sale of 3.51 cr shares in a price band of Rs 133-140. The issue would open on Wednesday the 22nd of November and close on Friday the 24th of November. The company is an NBFC and is focussed on the MSME segment. They cater to the MSME and the emerging self-employed individuals. They provide business loans, gold loans and housing loans whether through mortgage or loan against property. The NBFC is promoted by Federal Bank and has True North as a strategic PE Investor who invested in the company some five years ago. 

The company reported an EPS of Rs 5.59 for the year ended March 23. The PE for the share based on these earnings is 23.79-25.04. The NAV of the NBFC is Rs 42.11 prior to the issue. Based on this the price to book is 3.32. The valuation looks a tad expensive and this would get accentuated as the BFSI space continues to reel under selling pressure on account of the risk weightage that RBI has changed for consumer loans. While FedFina as the NBFC is popularly known is not affected as it is not present in the segment, the sentiment would get affected. The valuations in light of the new developments make the bank that much more expensive and considering the choice of four other issues on similar dates, make this a least preferred option. The issue may be looked at if funds are available or may be on listing. 

The market has five issues opening and closing between Tuesday the 21st of November and Friday the 24th of November. The amount to be raised would cumulatively be about Rs 7,400 crs, a fairly decent sum. This would put pressure on individual investors to allocate scare resources. Each individual needs to allocate resources based on likely subscription and hence allotment and then likely profits. For example, the buzz for Tata Technologies is the highest and would garner the largest subscription, implying the toughest allocation. Similarly, as mentioned and explained earlier, FedFina may have a tepid response in comparison to Tata Technologies. In short do some homework in allocating your resources for these five issues. 

Coming to the markets in the coming week, expect sideways movement with some wild intraday swings. Not much change on a weekly basis should be expected. A major move upwards would happen when participation in the benchmark indices from heavyweight laggards begins to happen. Till then trade cautiously.

Markets began with a very strong showing on Monday and that about summed up the week. They were flat for the next two days, gaining on one and losing on the other. The remaining two days saw markets lose and then gain. At the end of the week, while sentiment remained positive, markets were a little confused which way they wanted to go. At the end of the week, BSESENSEX gained 540.90 points or 0.84% to close at 64,904.68 points while NIFTY gained 194.75 points or 1.01% to close at 19,425.35 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.11%, 1.36% and 1.45% respectively. BSEMIDCAP gained 2.62% while BSESMALLCAP was up 2.10%. Suffice to say that all the gains in BSESENSEX were made on Monday while NIFTY gained a tad more on Friday. 

The Indian Rupee lost 6 paisa or 0.07% to close at Rs 83.34 to the US Dollar. Dow Jones gained on three of the five sessions and lost on two. It was up 221.78 points or 0.65% to close at 34,283.10 points. 

It was an action-packed week in the primary markets where we saw three listings and two issues open and close for subscription. The first share to list was Cello World Limited on Monday the 6th of November. Cello had issued shares at Rs 648. Shares had a strong debut at Rs 831, but profit booking saw the share close at Rs 791.90 on listing day. Shares gained Rs 143.90 or 22.20%. They traded sideways for the remaining part of the week and closed at Rs 788.40, a gain of Rs 140.40 or 21.67%. 

The second share to list was Honasa Consumer Limited which had issued shares at Rs 324. Shares listed at Rs 324 on Tuesday the 7th of November and closed day one at Rs 337.15, a gain of Rs 13.15 or 4.05%. By the end of the week, the share lost ground and closed at Rs 319.50, a loss of Rs 4.50 or 1.39%. 

The third share to list was ESAF Small Finance Bank Limited which had issued shares at Rs 60. The share listed on the bourses on Friday the 10th of November at Rs 71.90, a gain of Rs 11.90 or 19.83%. Profit taking saw the share close day one at Rs 69.05, a gain of Rs 9.05 or 15.08%. 

The first issue to open and close for subscription was Protean E-gov Technologies Limited. The issue had a price band of Rs 752-792 and was overall subscribed 15.96 times. The QIB portion was subscribed 33.81 times, HNI portion was subscribed 18.56 times and the Retail portion was subscribed 5.78 times. There were 5.67 lac applications in all. 

The second issue to open and close for subscription during the week was ASK Automotive Limited which had tapped the markets with its offer for sale in a price band of Rs 268-282. The issue was overall subscribed 51.14 times overall with QIB portion subscribed 142.41 times, HNI portion subscribed 35.47 times and Retail portion subscribed 5.70 times. There were 11.52 lac applications in all. 

With listings now happening in three days’ time, the entire cycle has reduced significantly. The above two issues would be listed on Monday and Wednesday respectively. 

Samvat 2080 would begin with ‘Muhurat’ trading being held on Sunday the 12th of November 23 between 6pm and 7.15 pm. Let us look at the broad performance of key indices during Samvat 2079 which began on 26th October 22 and ended on 10th November 23. BSESENSEX gained 5,360.72 points or 9.00% to close at 64,904.68 points. NIFTY gained 1,769 points or 10.01% to close at 19,425.35 points. BANK NIFTY gained 2,697.35 points or 6.56% to close at 43,820.10 points. BSEMIDCAP gained a massive 7,525.27 points or 30.05% to close at 32,566.13 points while BSESMALLCAP was the leader. It gained 9,630.82 points or 33.50% to close at 38,378.76 points. This outperformance by Midcap and Smallcap stocks has added to the glamour and buoyancy on Dalal Street as small investors who typically invest in these stocks have made big money. 

The week ahead has a trading holiday on Tuesday which would cause some sort of break of momentum in the markets at least temporarily. The fact that we have seen the level of 19,330-19,360 on NIFTY comfortably through last week’s trading adds a lot of comfort to the upward movement and momentum. The targets or resistance would now shift upwards to levels of around 19,650 on NIFTY and 65,600 on BSESENSEX. On the support side, levels of 19,200 on NIFTY and 64,225 on BSESENSEX would act as strong support. 

In terms of events, the results of five states elections to be declared on 3rd December would have at best a knee jerk action or reaction on the markets. Not much should be read into these elections results. The mood is optimistic currently and the street believes that post Diwali, markets will continue their upward trajectory. 

Let us welcome Samvat 2080 with great fanfare. 

Trade cautiously