Investors wary of escalating tensions in Middle East

The key event for the week ahead is the expiry of October futures, which would expire on Thursday (Oct 26). The series had begun at 19,523.55 points and after a choppy movement is currently trading at 19,122.15 points, a loss of 400 points

Bearish Tone

♦ Sharp sell-off in the mid-cap and Small-cap stocks

♦ Interest rates on 10-yr instruments rise to 4.83%

♦ It’s causing concerns

♦ Fall in oil price eased pressure

The October 18-25 period under review saw markets under selling pressure. The domestic markets fell sharply and it happened across the globe. Interest rates on 10-year instruments are moving to the five per cent level and closed at 4.83 per cent, which is causing concern. Oil, which had started its run towards the three-digit mark, fell sharply and eased pressure to some extent.0 fell on all the four trading sessions of the period under review. BSE Sensex lost 1,827.96 points or 2.77 per cent to close at 64,049.06 points, while Nifty lost 548.95 points or 2.79 per cent to close at 19,122.15 points. Monday saw a sharp sell-off in the mid-cap and Small-cap space, which broke the camel’s back. This selloff was long overdue, but finally happened on Monday. This would have a significant bearing on SME primary markets going forward as well.

Dow Jones after losing continuously for four trading sessions, finally gained. They were still down and lost 836.27 points or 2.46 per cent to close at 33,141.38 points. In primary market news, we saw the issue from IRM Energy Ltd open and close for subscription. The issue for 1.08 cr shares in a price band of Rs480-505 was open from Wednesday (October 18) to Friday (October 20). The issue was subscribed 27.05 times with QIB portion subscribed 44.73 times, HNI portion subscribed 48.34 times and Retail portion subscribed 9.29 times.

There is one issue, which would open on Wednesday (October 25) and close on Friday (October 27). The issue from Blue Jet Healthcare Limited is entirely an offer for sale by the promoters for 242.85 lakh shares in a price band of Rs329-346. The issue would garner Rs840 crore.

The company reported revenues of Rs721 cr and an EBITDA margin of 30.39 per cent and PAT margins of 22.20 per cent. The EBITDA in absolute terms was Rs219 cr and PAT was Rs160 cr. The reported EPS for FY23 was Rs9.23 and the PE multiple, price band is 35.64-37.49. The company is into three business verticals where the largest is contrast media where it makes chemicals used during MRI and CT scan. This is the largest business vertical for the company and they have relations with the top four players in the vertical who control almost 78 per cent of the global market. The second business vertical is making synthetic sugar sweeteners used across product categories such as beverages, toothpaste and even pharma. The third vertical is CDMO where they make value added products for pharma players across the globe.

As the issue is an offer for sale, there would be no objects of the issue. However, the company is in the midst of capacity expansion, which will be up and running in the fourth quarter of FY24. This would raise the capacity from the present 1,100 KL to about 1,500 KL. They are also working on a larger capex, which has started, but would take about 18-24 months for completion which would take the capacity further higher to about 2,200KL. The production of higher value adds products would come from this expansion and costlier molecules would be produced.

The share is attractively priced and offers good scope for returns to shareholders.

We have roadshows coming up in the week ahead from plastics home consumer goods and writing instruments manufacturer, Cello World Limited. The other issue coming up is from Honasa Consumer Limited, the retailer of Mama Earth products in the cosmetic and beauty care range. These issues would open in the following week.

The key event for the week ahead is the expiry of October futures, which would expire on Thursday (October 26). The series had begun at 19,523.55 points and after a choppy movement is currently trading at 19,122.15 points, a loss of 400 points. Anything can happen on the last day, but a pullback of over 400 points in the current geo-political situation looks almost impossible.

Coming to the week ahead in the period October 26-November 1, the markets would be volatile and nervous on developments on the Gaza border. Events there are moving at a very fast pace and things seem difficult to come under complete normalcy anytime soon. The number of casualties is rising very fast and suffices to say that they are across the border and not in Israel. The number is scary and with multiple missiles and rockets, the number seems to be spiraling.

Multiple supports on the Nifty, which corresponded to various intra-day lows of 19,223.65 points (August 31), 19,255.70 points (September 1), 19,333.60 points (October 4) have all been violated with today’s low of 19,074.15 points. This does not augur well for the markets. Key supports are at around 18,800-18,850 levels on Nifty and 63,000-63,200 on BSE Sensex. The series of up moves and the entire euphoric stance of the markets are clearly behind us. It’s now time for consolidation with a downward bias.

Use any rallies to sell and very sharp falls to do small selective buying in the large-cap space. Trade cautiously.

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