Broad market looks expensive; find value in range

Markets were volatile and as mentioned in last week’s article the moment they overcame STT blues, markets rallied strongly. They were up on four of the five trading sessions and many of doomsday predictions from people who spoke on television about India on budget day, seem to be now hiding.

BSE-SENSEX gained 2,857.46 points or 3.54 per cent to close at 83,580.40 points while NSE-NIFTY gained 868.25 points or 3.50 per cent to close at 25,693.70 points. BANK-NIFTY gained 1,703.35 points or 2.92 per cent to close at 60,120.55 points.

The broader markets saw BSE-100, BSE-200 and BSE-500 gain 3.42 per cent, 3.73 per cent and 3.57 per cent. BSE-MIDCAP gained 3.51 per cent while BSE-SMALLCAP was up 3.07 per cent. The one sore point was the IT space, which got hammered quite sharply after Anthropic launched an artificial intelligence tool. Even in India, the BSE-IT lost 6.80 per cent.

The lows made on budget day 1st February were at 79,899 points on BSE-SENSEX and 24,571 points on NSE-NIFTY. The highs made on Tuesday the 3rd of February were at 85,871 and 26,341 respectively. Volatility during the week on an intraday basis has been huge.

News flow has been terrific. It all began with the India-EU deal after Republic day. Then the budget on 1st February where STT on F&O spooked the markets. Then the India-US deal where one gets the feeling that Donald Trump felt left out and realized that a country with 1.4 billion not being there is disadvantageous to the US.

And finally, it appears that Iran-US conflict may not happen and simultaneously Ukraine will have to surrender as it runs out of money and supporters. With so much happening, markets had to respond sooner or later.

The Indian Rupee staged a rebound gaining Rs1.06 or 1.16 per cent to close at Rs 90.63 to the US Dollar. Dow Jones at the end of four trading sessions was flat and then on Friday, it gained 1,206 points. Dow gained 1,223.20 points or 2.50 per cent to close at 50,115.67 points. Dow gained on three of the five trading sessions and lost on two.

There are two main board IPO’s in the week ahead. The two issues are from Aye Finance Limited which taps the markets with its fresh issue of Rs710 crores and an offer for sale of Rs300 crores in a price band of Rs122-129. The issue opens on Monday the 9th of February and closes on Wednesday the 11th of February.

The company is in the business of providing secured and unsecured loans to micro scale MSME in the manufacturing, trading services and allied agriculture including dairy industries. It is present in 18 states and three union territories.

The company reported an EPS of Rs9.34 on a fully diluted basis for the year ended March 25. Based on this EPS, the PE multiple is at 13.06-13.81. The company offers scope for appreciation looking at the multiples which its listed peers like SBFC Finance quotes at.

The second issue is from Fractal Analytics Limited which is tapping the markets with its fresh issue of Rs1,023 crores and an offer for sale of Rs1,810 crores in a price band of Rs857-900. The issue opens on Monday the 9th of February and closes on Wednesday the 11th of February.

The company reported and EPS of Rs13.96 on a fully diluted basis for the year ended March 25. Based on this EPS, the PE multiple is at 64.15-67.37. The company is a globally recognized enterprise artificial intelligence company with a vision to power human decisions in their client’s enterprises by leveraging AI.

They support large enterprises with data driven insights. The company reported revenues of Rs 2,703 crores for the year ended March 2025 and Rs 1,518 crores for the six months ended September 25. PAT for the full year was at Rs220 crore and at Rs71 crore for the six months.

In terms of competition, the RHP says that there are none. The PE for the company is therefore difficult to justify and comprehend as one fails to understand who is competition in India and globally. A few quarters post listing when information about the company is more widely available would help in understanding the company better.

After last ten days the markets have established a broad range for itself with the highs and lows at levels of 24,500 and 26,300 points.

Markets breaking either of these levels in the medium term looks unlikely. These could be further fine-tuned to support at 25,400-25,500 and resistance at 26,000 levels. One needs to get worried if either of these are broken.

With trade deals having been done, global cues showing signs of improving relations across the board, oil prices stabilizing, its time markets looked at performance of companies and economy.

While in India, economy is in fine fettle what is bothering or bothersome is performance of companies. They have not done as per expectation and as a result the broad market looks expensive, offering fewer choices for investment opportunities.

The strategy would be to look for outstanding results in the week ahead which would be the last week for the current quarterly results and look for fresh investment opportunities.

Fine print of the US trade deal is still some time away but basics announced so far, show no cause for the drama that the opposition enacted in Parliament. Trade cautiously and look for fresh ideas and investment opportunities.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)