Sebi's new norms paving the way for markets to new highs

The June 24-30 period was an interesting phase for the stock markets. They gained on the first two days and lost on the remaining three. BSE Sensex gained 176.63 points or 0.34 per cent to close at 52,482.71 points. NSE Nifty gained 34.55 points or 0.22 per cent to close at 15,721.50 points. Today we saw them reverse all their gains and finally close in the red.

During the course of the period under review, BSE Sensex made a new intraday high of 53,057.11 points and also a closing high of 52,925.04 points. Nifty did not make any new highs whether on intraday basis or closing basis. The highs remain at those last made on June 15.

During the period under review, we saw June futures expire on a positive note gaining 452.60 points or 2.95 per cent to expire at 15,790.45 points. This has been an important series for the bulls to gain as markets were quite volatile during the series. Interestingly the new July series is for a period of five weeks and would expire on Thursday (July 29).

Sebi at its recent board meeting has announced interesting and far-reaching changes, which would have an impact on the capital markets. Firstly, the regulator has changed the trading lots for REITS and INVITS to 1 from the present 200 in case of REIT and substantially higher for INVIT. It has further specified that retail investors would be eligible to apply for a lot size of between Rs10,000-15,000 on application, making this product affordable for retail investors.

Secondly, they have introduced a new concept of Accredited Investor. While details of the same are awaited, in short it takes into account the skill and experience of investors over the years and treats them at par with HNI's. This would make the accredited investor with a smaller ticket size equal an HNI without accreditation even though he has a higher ticket size. Thirdly, a number of changes have been made in the case of appointments of independent directors and they have been made more accountable and given a bigger role. This should help the independent director be more independent and actually have a role to play going forward.

Markets are struggling to move up and are finding it tough. Secondly, one has seen that the momentum in small cap and midcap stocks seems to have gone and the action now is shifting back to the large cap stocks. Incidentally today, June 30 was the last day of the April-June quarter and also the extended date for corporates to announce audited results for the March ending quarter and annual results.

Going forward, in the period of July 1-7, markets may make yet another attempt to post new highs. If it does so, this should be an opportunity to sell and book profits. Use all rallies to book profits and very sharp dips to buy into the market. Only advice is to buy quality stocks and preferably from the large cap. Avoid small cap and midcap stocks from now on. They seem to have run their course as a pack. During the period under review, four primary issues listed. The first was Shyam Metalics & Energy Limited which had issued shares at Rs 306. The share closed day one at Rs 375.87, a gain of 22.82 per cent. It closed trading today marginally lower at Rs 369.45. The second share to list was from Sona BLW Precision Forging Limited which had issued shares at Rs 291. The share closed at Rs 362.85, a gain of Rs 24.69 per cent on day one. The share closed today at Rs 342.40. The third share to list was from Dodla Dairy Limited which had issued shares at Rs 428.

The share closed at Rs 609.10, a gain of 42.31 per cent. It has slipped to Rs 575.10. The fourth and final share to list was Krishna Institute of Medical Sciences which had issued shares at Rs 825. The share closed day one at Rs 995.90, a gain of Rs 20.71 per cent. The share has since slipped to close at Rs 946.75. There was an IPO from India Pesticides Limited which had tapped the markets during this period. The issue was in a price band of Rs 290-296 and was subscribed 29.64 times overall. QIB portion was subscribed 43.84 times, HNI portion was subscribed 52.95 times and Retail portion was subscribed 11.54 times. The issue size was Rs 800 crore with the fresh issue being Rs 100 crore and an offer for sale portion being Rs 700 crore.

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