Sensex, Nifty Slip as Geopolitical Uncertainty and IPO Frenzy Test Investor Patience

The week gone by was one of two halves. The first saw markets declining all the way till Thursday morning and then making a sharp U-turn on Thursday. In the second half it made sharp recoveries on Thursday and Friday, but not enough to reverse the losses markets suffered.

It did however experience a substantial recovery from Thursday’s lows which were made at 84,150.19 on BSESENSEX and at 25,693.25 points on NIFTY. Markets gained on two of the five trading sessions and lost on three. BSESENSEX was down 444.71 points or 0.52 per cent to close at 85,267.66 points while NIFTY lost 139.50 points or 0.53 per cent to close at 26,046.95 points.

BANKNIFTY lost 387.25 points or 0.65 per cent to close at 59,389.95 points. The broader markets saw BSE100, BSE200 AND BSE500 lose 0.54 per cent, 0.46 per cent and 0.44 per cent respectively. BSEMIDCAP lost 0.30 per cent while BSESMALLCAP lost 0.40 per cent.

The Indian Rupee continued to be under pressure and lost 44 paisa or 0.49 per cent to close at Rs 90.52 to the US Dollar. The US FED has cut interest rates by 25 basis points to a band of 3.5 per cent - 3.75 per cent during its two-day meeting held between Thursday and Friday, last week. Dow Jones gained on two of the five trading sessions and lost on three. It was up 503.06 points or 1.05 per cent to close at 48,458.05 points.

The primary market juggernaut continues. On Friday last week, we saw the mega-issue from ICICI Prudential Asset Management Company Limited open. The issue consists of entirely an offer for sale of 4.89 crore shares in a price band of Rs 2,061-Rs 2,165. The issue would raise Rs 10,600 crores at the top end of the price band.

The company is the 2nd largest AMC in the country after SBI. This business has one great characteristic, that it does not require capital for doing the business. The AUM of investors is the capital, and the AMC gets a commission on handling the money and generating returns for unit holders and now shareholders.

There is another issue which would open in the week ahead from KSH International Limited which is tapping the markets with its fresh issue of Rs 420 crores and an offer for sale of Rs 290 crores. The price band is Rs 365-384 and the issue would open on Tuesday the 16th of December and close on Thursday the 18th of December.

The company is the 3rd largest manufacturer of magnet winding wires in the country in terms of capacity. It is also the largest exporter of such wires from India. It is doubling its capacity from the roughly 30,000 MT that it has currently to 60,000 MT in two phases.

As of date the first phase of expansion of 12,000 MT has already been commissioned and the second phase of 18,000 MT is roughly 15 months away. There is huge demand of the company’s products looking at the need for transformers which need to be replaced and also new demand looking at the massive thrust on renewable energy like wind and solar.

We also have in the midst of all of this a company on the SME platform which has opened its issue to raise Rs 12.27 crores. What raises eyebrows and draws attention to is the fact that the company is into the business of selling vegetables through the company’s outlets in Gujarat. The fixed price is Rs 30. The share would list on BSE SME exchange and the issue is open from 12th to 16th December.

No business is small and everyone has a right to access the capital markets. The issue has been subscribed 0.05 times at the end of day one. The merchant banker of this company is Grow House Wealth Management Private Limited.

Looking at the kind of issue hitting the markets, it makes one wary and skeptical. Hope the stock exchanges and the regulator are taking care of the system or we could see a larger meltdown in the markets in time to come.

We would be having quite a few listings on the main board in the week ahead. They would be led by mattress and furniture maker Wakefit Innovations Limited on Monday, 15th December along with Corona Remedies Limited. This would be followed by Nephrocare Health Services Limited and Park Medi World Limited on Wednesday the 17th of December.

Markets are currently struggling and are not having any trend. The atmosphere is one of anticipation and people waiting for strong news flow which is expected to drive markets. The visit of Russian Premier happened and no trade deals have been announced as yet.

USA wants to push the agreement with India and maintain its hold, but is for reasons best known to them not announcing the deal. They did rush a team to India, but that’s that. This state of limbo saw markets crack last week but find strong support at areas of around 25,700 on NIFTY. This continues to be a strong support zone.

On the upside we have a clear pathway which could take us to 26,500 and beyond……… provided there is big news. When that would happen or come, your guess is as good as mine. What if it does not come? We will continue to wait and hope for the best. The simple strategy would be to keep your ears to the ground and hope to pick up even murmurs.

Markets are evenly poised and are testing one’s patience. News on the Russia-Ukraine front or the US trade deal have a big potential to drive markets with many ramifications as well. The delay could at worse dampen the sentiment and make people desperate to take wrong decisions. Look to buy on dips and there will be plenty of such moves in the short term.

Take advantage of the uncertainty and sell what you have bought when everyone wants to buy. Keep in mind that in roughly four weeks’ time from now we would be discussing Q3 results for the October to December quarter. Trade cautiously but be extremely patient.

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