Caution Alert To Investors Amid Uncertainty

The period December 5-11 under review has been a slow grind for the markets. Other than the opening day of the period on December 5 when markets gained handsomely, they have been struggling to find momentum. So much so, that all the gains of the period under review were clocked on the opening day itself and some of it has been surrendered in the remaining days of the week. BSE Sensex gained 569.81 points or 0.70 per cent to close at 81,526.14 points. BSE Sensex gained on one of the five trading sessions, lost on two and was flat on the remaining two sessions. Nifty gained 174.35 points or 0.71 per cent to close at 24,641.80 points. Nifty gained on two of the five trading sessions and lost on two. In the fifth session it was flat.

Dow Jones has been on a consolidation mode and continued to be under pressure though mild. It lost on four of the five trading sessions and was down 457.70 points or 1.02 per cent to close at 44,247.83 points.

The period gone by saw one primary market listing. Shares of Suraksha Diagnostics Ltd, which had received a muted response during subscription, listed on Friday (December 6). The shares which were issued at Rs441 debuted at Rs437 and closed at Rs417.95, a loss of Rs23.05 or 5.23 per cent. In the remaining three days of the period, they lost further ground and closed at Rs417.55, a loss of Rs23.45 or 5.31 per cent. Incidentally PE multiple of the issue was at 100.

There are five issues in the period ahead with three of them opening on Wednesday (December 11) and closing on Friday (December 13). The first of the lot is from Vishal Mega Mart Limited, which is tapping the markets with its offer for sale of Rs8,000 crores in a price band of Rs74-78. The company reported revenues of about Rs8,900 crores for the year ended March 24. Its PAT was Rs82.80 crores and the EPS was Rs1.01. The PE for the issue is in a band of 73.27-77.23.

In comparison to Avenue Supermarts Ltd, the company which runs D Mart, the revenues are at Rs50,788 crores and the PE is much higher at 98 times. While Vishal has a larger store count, its revenue per store and profitability is significantly lower. The two businesses are not comparable as in the case of Vishal, garment and fashion are roughly half while this is less than a quarter for D Mart. The issue is likely to offer listing pop and could be applied for the same.

The second issue is from One MobiKwik Systems Limited. The issue is for a fresh issue of Rs572 crore in a price band of Rs265-279. The company is a platform business with a two sided payments network, consisting of consumers and merchants. The key business consists of payment services and financial services. It is a platform which offers BNPL (Buy now pay later) facilities as well. The company has turned profitable in FY24. It earned an EPS of Rs2.38 on a fully diluted basis for the year ended March 24. The PE for the issue is in a band of 111.34-117.23. The business being platform driven and a new age company offers rapid scalability. There is likely to be listing gains in the share.

The third issue is from Sai Life Sciences Limited which is tapping the markets with its fresh issue of Rs950 crores and an offer for sale of 3,81,16,934 shares in a price band of Rs522-549. The company reported revenues of Rs 1,468 crores and a PAT of Rs82.80 crore for the year ended March 24. The issue would raise Rs3,043 crore at the upper end of the price band. The PE for the issue is 115.23-121.19 times. Not cheap by any standard. The company is a CRDMO player and there is plenty of competition in this segment. Further the life cycle of research and then the production or commercialization of the product takes a long time. The issue can be skipped currently and looked at post listing.

The fourth issue which opens on Thursday (December 12) and closes on Monday (December 16) is from Inventurus Knowledge Solutions Limited. The issue consists entirely of an offer for sale issue in a price band of Rs 1,265-1,329. The issue would garner between Rs2,378 crore to Rs2,488 crore at the top end of the price band. The company reported an EPS of Rs22.15 for the year ended March 24 on a fully diluted basis. The PE for the share is at 57.11-60.00. The company is into the business of providing back-end services to doctors in the US. The issue looks richly valued and can be given a miss in this crowded IPO market.

The fifth and final issue is from International Gemological Institute (India) Limited. The issue consists of a fresh issue of Rs1,475 crores and an offer for sale of Rs2,750 crore. The total issue size is Rs4,225 crore and the price band is Rs397-417. The company is into the business of certifying diamonds whether natural or lab-grown and precious or colored stones. Besides this it also certifies jewellery which is a tough job as one does not have the luxury of removing stones and individually testing them. The company has a virtual monopoly in lab-grown diamonds which partially explains the sharp jump in volumes of diamonds tested and certified. The PE multiple of the issue is 48.93-50.98 and offers scope for listing pop.

These five issues will help keep interest in the primary market alive and at the same time put pressure on the liquidity in the marketplace.

RBI in its bi-monthly MPC meeting kept repo rates unchanged on expected lines. It however cut CRR by 50 basis points to make the cost of funds for the banks cheaper than the current rates. This would give liquidity to the banking industry and simultaneously make the cost of funds cheaper as well.

Markets after doing well seem to be finding it tough. No cause for alarms as yet but the upside is getting under pressure. Markets have had a good week and have surmounted resistances on the way up during the period under review. The next resistance is around 24,950-25,000 points on Nifty and at 82,600-82,800 points on BSE Sensex. Once this is taken out, the next resistance would be around 25,250 points or 83,550 points. These would be much tougher to break and sustain. On the downside we have support at 24,250 points and 80,500 points respectively. If these levels are broken, we have the next support zone at 23,850 and 79,300 points respectively.

The strategy for the period ahead would be to look at the large cap stocks for comfort as they have the momentum with them. Secondly look at a select group of midcap and small cap stocks which have been moving up and are now close to their 52-week highs. Though FPIs have been buyers during a few days over the last week, it is not yet comfortable that they are back. It therefore is imperative to have a safety backup and not go all out. In a fortnight’s time the year would come to an end and we would be looking at December quarter results, which one can’t be sure would be all that great. Time to be watchful and trade cautiously.

(The author is the founder of Kejriwal Research and Investment Services,

an advisory firm)