Caution alert for investors

Wait For Next Cues

♦ 5 listings during Sept 21-27

♦ SME exchange turned distinctly weak

♦ As Sebi extended the ASM structure to this platform

♦ Better to wait n watch till Sept qtr results

The domestic markets in the September 21- 27 period have found the going tough. They lost on two of the five trading sessions and had a very strong recovery from the lows on Wednesday and were flat on the remaining two sessions. Very clearly the journey after crossing Mount 20K has not been inspiring. The markets are finding incremental climb very tough and full of resistances. We are very close to crucial support of 19,600 points on Nifty and 65,900 on BSE Sensex. They did act as decent support today. If these get decisively violated, we could see a sharp fall. BSE Sensex lost 682.15 points or 1.02 per cent to close at 66,118.69 points, while Nifty lost 184.95 points or 0.93 per cent to close at 19,716.45 points.

The US FED met at the beginning of the period under review and decided to keep interest rates unchanged. They, however, were hawkish in their commentary and indicated that there would be at least one more hike before the calendar year ends. Dow Jones lost 898.85 points or 2.60 per cent to close at 33,618.88 points. Dow Jones lost in four of the five trading sessions.

The primary markets seem to be having the time of their lives. There were five listings which happened during the period under review.

The first share to list was EMS Limited, which did so on Thursday (September 21). Shares were issued at Rs211 and it closed day one at Rs279.75. By the end of the week, the share saw profit taking and lost ground. The share closed at Rs248.65, a gain of Rs37.65 or 17.84 per cent.

The second share to list was Samhi Hotels Ltd, which had issued shares at Rs126. The share closed on Friday, the listing day at Rs143.55, a gain of Rs17.55 or 13.93 per cent. By Wednesday, the share gained further to close at Rs146.95, a gain of Rs20.95 or 16.62 per cent.

The third share to list was Zaggle Prepaid Ocean Services Ltd, which had issued shares at Rs164. After opening marginally lower, the share saw profit taking and closed even lower at Rs158.30, a loss of Rs5.70 or -3.48 per cent. In recent times, this is one of the few shares to close lower than the issue price on debut day. During the remaining part of the period under review the share gained ground to close at Rs184.25, a gain of Rs20.25 or 16.40 per cent.

The fourth share to list was Signature Global (India) Limited. The company had issued shares at Rs385. The listed price on BSE was Rs445, a gain of Rs60 or 15.58 per cent. The share gained further to close at Rs458.40, a gain of Rs73.40 or 19.06 per cent.

The fifth share to list was Sai Silks (Kalamandir) Limited, which had issued shares at Rs222. The share listed at Rs230.10 on BSE, a gain of Rs8.10 or 3.65 per cent. By the end of the day, the share had gained further to close at Rs244.85, a gain of Rs22.85 or 10.29 per cent.

Three shares closed their subscription during the period under review. The first was Manoj Vaibhav Gems N JewelleRsLimited which had issued shares in a price band of Rs204-215. The issue was subscribed 2.33 times overall with QIB portion subscribed 1.08 times, HNI portion subscribed 5.40 times and Retail portion subscribed 1.73 times. There were just under one lakh applications.

The issue from JSW Infrastructure Ltd, which was open from Monday (September 25) to Wednesday (September 27) was subscribed 39.36 times overall with QIB portion subscribed 60.12 times, HNI portion subscribed 16.83 times and Retail portion subscribed 10.86 times. There are 16.90 lakh applications. The price band of the issue is Rs113-119.

The issue from Updater Services Ltd was open from Monday (September 25) to Wednesday (September 27). The price band was Rs280-300. The issue was subscribed 2.96 times overall with QIB portion subscribed 4.50 times, HNI portion under subscribed at 0.89 times and Retail portion subscribed 1.44 times. There were 49,711 applications in all.

The undercurrent on the SME exchange turned distinctly weak after Sebi extended the ASM structure to this platform with effect from October 3. This will impact the listings of the SME issues, their subscription levels and most importantly the returns that investors make. While the move by the regulator is most welcome, a little more needs to be done with respect to allotment on the SME platform. Currently the allotment is on a proportionate basis where people who apply for higher amounts get a benefit. On the main board, it makes no difference with your subscription amount if the issue is over subscribed. One wonders why the regulator is allowing this to happen for so long and thereby creating ground for domination in allotment in the hands of a few.

September futures would expire on Thursday, the first day of the new period under review of September 28- October 3. The current value of Nifty at 19,716 points is a mere 56 points or 0.28 per cent higher than the opening level of the series at 19,659.90. Anything can happen in one day.

Coming to the period ahead, expect volatility to continue. While the new series would begin on Friday (September 29), the same is a short one with a holiday on October 2. This would reduce the trading cycle to a mere 4 days and make markets more vulnerable with a longer weekend. Markets have rebounded from lower levels, but whether it is just a technical bounce or is actually a turnaround, only time will tell. The strategy would be to sell on rallies and buy on sharp dips. Results season for the July-September quarter would kick in the next ten days, which would be a good time to make new trading calls. Till then trade cautiously.

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