By Arun Kejriwal
Markets were in a positive mood and gained during the week. They were up the first two days, lost on the next two days and ended the week on a positive note, giving hope and expectations of a positive start next week.
Interest rates were raised by the FED on expected lines, but the resilience shown by Indian markets was commendable. To add to the comfort was the fact that FPI's were buyers on all the five trading days.
BSESENSEX gained 990.51 points or 1.65 per cent to close at 60,950.36 points while NIFTY gained 331.35 points or 1.86 per cent to close at 18,117.15 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.91 per cent, 1.97 per cent and 1.93 per cent respectively. BSEMIDCAP gained 2.39 per cent while BSESMALLCAP gained 1.46 per cent respectively.
The Indian Rupee gained 3 paisa or 0.04 per cent to close at Rs 82.44 to the US Dollar. The US FED at its meeting on Wednesday raised interest rates by 75 paisa on expected line. This was the fourth consecutive 75 basis points hike. Interest rate band in the US is now 3.75 per cent -4 per cent.
Dow Jones had a very volatile Wednesday, the day the hike was announced. Markets post the hike rallied sharply and gained close to 500 points and after the gain, settled lower by 505 points. Effectively, a loss of almost 1,000 points from the high to the close. Dow lost on the first four days of the week and gained smartly on the final day of the week. Dow was down 458.58 points or 1.40 per cent at 32,403.22 points for the week.
The primary market continues to see a lot of action from companies who have taken advantage of the 135 days norm and tapped the markets with results for the June quarter. We have seen two companies closing their issues in the week gone by. Two more have seen their issues open during the week gone by and would close in the coming week. Yet another two would launch their issues in the current week and have held their roadshows to announce the same. Two more would be launching their roadshows on Monday, taking the total to 8 issues. We will restrict to the first six.
DCX Systems Limited had launched its fresh issue for Rs 500 crore in a price band of Rs 197-207. The issue was open between Monday the 31st of October and. Wednesday the 2nd of November. The issue was subscribed 76.23 times. QIB portion was subscribed 95.02 times, HNI portion 46.20 times and Retail portion 64.87 times.
The second issue was from Fusion Microfinance Limited which had tapped the markets with its fresh issue of Rs 600 crore and an offer for sale of 136.95 lakh shares in a price band of Rs 350-368. The issue was open between Wednesday the 2nd of November and Friday the 4th of November. Unlike DCX, the issue received a tepid response from the non-institutional portion. The issue was overall subscribed three times with the QIB portion subscribed 8.53 times, HNI 1.41 and Retail 0.53 times. It appears the microfinance sector is not seeing traction currently in the markets.
The issue from Bikaji Foods International Limited is currently on. The offer for sale of 293.74 lakh shares in a price band of Rs 285-300, had opened on Thursday the 3rd of November and would close on Monday the 7th of November. At the end of the second day, the issue was subscribed 1.48 times with QIB portion subscribed 0.03 times, HNI portion subscribed 1.42 times and Retail portion subscribed 2.33 times.
The issue from Global Healthcare Limited, which had tapped the markets with its fresh issue of Rs 600 crore and an offer for sale of 507.61 lakh shares in a price band of Rs 319-336, is currently on. The issue had opened on Thursday the 3rd of November and would close on Monday the 7th of November. At the end of day 2, the issue was overall subscribed 0.50 times with QIB portion subscribed 0.58 times, HNI portion 0.97 times and Retail portion 0.25 times.
The first of the two issues to tap the market in the week ahead is from Five Star Business Finance Limited which is tapping the markets with its offer for sale to raise Rs 1,960 crore at the top end of the band. The issue opens on Wednesday the 9th of November and closes on Friday the 11th of November. The price band is Rs 450-474. The company is a NBFC lending to micro-entrepreneurs. It began its operations in Tamil Nadu and derives a dominant share of business from the four Southern states of Tamil Nadu, Karnataka, Andhra Pradesh and Telangana. It charges an average interest rate of 24 per cent and does secured lending against collateral of land and property. Its ticket size is between 2-5 lakh and the average ticket size currently is Rs 2.57 lakh.
Its revenues for FY22 were Rs 1,253 crore while profit after tax was Rs 453.54 crore. Its basic EPS was Rs 16.09 while fully diluted EPS was Rs 15.92. The PE band of the stock is 28.26-29.77 which compares very favourably with the companies the company has compared itself with. They are AU Bank, Aavas Finance and Aptus Housing. The company is into a niche segment and offers appreciation in the medium to long term.
The last issue is from Archean Chemical Industries Limited which is tapping the markets with its fresh issue for Rs 805 crore and an offer for sale of 161.50 lakh shares in a price band of Rs 386-407. The issue opens on Wednesday the 9th of November and closes on Friday the 11th of November. The company is a leading speciality marine chemical manufacturer, producing and exporting bromine, industrial salts and sulphate of potash. The company is located over a massive 60,000 acres of land in the Rann of Kutch where it has its brine fields. Its raw material is sea water.
The company reported revenues of Rs 1,142 crore for FY22 and a profit after tax of Rs 188.5 crore. The EPS was Rs 18.26. The company enjoys very high margins because of its stature as a leading global player of size and quality products. The PE band is 21.13-22.29 times. This is a company which will give decent returns to serious players with a long-term holding period.
Coming to the markets in the week ahead, one should expect the markets to build on the gains of the last week. Key resistances have been crossed with ease and they are well poised to rise higher. The key levels to watch are the supports at 17,850-17,900 and 60,200-60,300. On the upside the markets are all set to gain another 250-300 points on NIFTY and 750-900 points on BSESENSEX in the short term. Tuesday is a trading holiday and that could cause a break in the current momentum. Once these targets are crossed and sustained, there would be a serious attempt to challenge the all-time highs whether it is successful or a failure yet to be decided.
Trade with a positive mindset and use dips or corrections to add to your positions. Expect markets to rally further.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)