Choppy, Volatile Trading More Likely

It was a turbulent and wild period October 31-November 6 under review. This included futures expiry of October series and ‘Muhurat’ trading of Samvat-2081. Both were eventful days and have their own relevance and importance. The period ended with US Presidential elections where it appears that there would be a change of guard with Republicans led by Donald Trump capturing the White House. BSE-Sensex gained 435.95 points or 0.55 per cent to close at 80,378.13 points, while Nifty gained 145.50 points or 0.60 per cent to close at 24,486.35 points. It’s important to note that Monday witnessed 1,000 plus points movement on BSE Sensex on a net basis while it was 900 points on Wednesday. It was 300 plus points on Nifty and then 270 points. Losses of Monday were almost compensated on Wednesday with Tuesday more than making up the difference. Markets gained on three of the five sessions and lost on two.

Dow Jones gained on two of the five sessions and closed virtually flat. Dow was down 11.17 points or 0.03 per cent to close at 42,221.88 points. Post the outcome of US elections, Dow futures are up more than 1,000 points. Interestingly, the Fed meets today for its monetary policy review meeting where a rate cut is widely expected. One will need to see what announcements about tax cuts will do to the US economy as along with the tax cuts, Trump has also spoken about anti-dumping duties on a host of products, which would raise inflation in the US.

October futures expired on what is the biggest loss in 4.5 years ever since the onset of Covid-19 in March 2020. Nifty futures lost 2,010.70 points or 7.67 per cent to close at 24,205.35 points.

Friday (November 1) saw ‘Muhurat’ trading for Samvat-2081 begin on an auspicious note. In the brief 1 hour of trade with low volumes, markets saw BSE Sensex gain 335.06 points, while Nifty gained 99 points.

It has been a busy week for the primary markets with shares of Afcons Infrastructure listing on Monday (November 4). The company had issued shares at Rs463 debuted at Rs430.05 and closed day one at Rs474.55, a gain of Rs11.55 or 2.49 per cent. By Wednesday, the share had gained further and closed at Rs488.05, a gain of Rs25.05 or 5.41 per cent.

The current week sees three IPOs, which have opened on Wednesday and would close on Friday, while the last one would open on Thursday and close on Tuesday (November 12).

The first issue is from Swiggy Ltd, which consists of a fresh issue of Rs4,499 crore and an offer for sale of 17,50,87,863 shares in a price band of Rs371-390. The issue opened on Wednesday (November 6) and would close on Friday (November 8).

The company is into the business of offering an easy-to-use convenience platform, accessible through a unified app. The object is to browse, select, order and pay for food, grocery and household goods. It can also be used to make restaurant bookings (Discount) and for events bookings (Stepping Out). Access to all of this is available through membership programs.

Currently the company is loss making and while it hopes to become profitable in the near foreseeable future, one is not sure of the timeframe. The company is loss making and therefore has an infinite PE. Trying to evaluate such a company’s fundamentals are indeed difficult and with the amount of paper available for Swiggy in the unlisted market which would be available at every rise in price, applying for the shares in the short to medium term or for listing pop is not viable or profitable.

The second issue to tap the markets is Sagility India Ltd, which is tapping the markets with its offer for sale of 70,21,99,262 shares in a price band of Rs28-30. The issue opens on Tuesday (November 5) and closes on Thursday (November 7). The company is into the business of providing technology-enabled business solutions and services to clients in the US Healthcare Industry. The company is a pure-play healthcare focused services provider and clients include Payers (US health insurance companies), which finance and reimburse the cost of health services) and Providers (primarily hospitals, physicians, and diagnostic and medical devices companies).

The company reported revenues of Rs4,753.55 crores for the year ended March 24. It reported a profit after tax of Rs589.55 crores and a PAT margin of 12.40 per cent. The fully diluted EPS was Rs0.53. The PE for the issue based on March 24 financials is 52.83-56.60. Expensive valuations at current times. There is not much that the company offers in terms of listing pop. In the long term we need to look at coming two quarters before taking a call. One positive factor is the price band which is at Rs28-30. This looks attractive to investors and may receive disproportionate subscriptions from retail looking at the band.

The third issue is from Acme Solar Holdings Limited which is a fresh issue of Rs2,395 crore and an offer for sale of Rs505 crore. The issue would open on Wednesday (November 6) and close on Friday (November 8). The company is into the business of setting up renewable energy power projects in solar and wind and also hybrid. As on date of RHP, the company has 1,340MW of operational capacity, 3,250MW of under construction and contracted capacity and 1,730MW of under construction and awarded capacity.

The price band of the issue is Rs275-289. The company will have a part of the under construction going on stream in the next 3-12 months while all of the projects which are under construction would be up and running in the next 24 months. The share is attractively priced for investors with a medium-term outlook. There may be some listing gains but that should not be the incentive to apply.

The fourth and final issue is from Niva Bupa Health Insurance Company Limited. The issue consists of a fresh issue of Rs800 crore and an offer for sale of Rs1,400 crore in a price band of Rs70-74. The company is into the health insurance space and is one of the fastest growing companies in the space. The company offers appreciation in the medium to long term and would be attractive to invest with a medium to long term approach.

Coming to the markets in the week ahead, expect them to remain choppy and volatile. FPIs have not yet reduced their selling or turned buyers. This would be a cause for concern and would make a material difference to Indian markets. The damage that has happened to values is in the large cap stocks and their values have corrected sharply. There is pull back but not complete. The damage in small and midcap was there, but significantly less than the large cap.

What the FED does tonight will have an impact on our markets because that would be a key parameter for FPI action going forward. In terms of resistance levels of 24,900 would be upward resistance while solid support exists at 24,000 levels and further down between 23,650 and 23,850 points. It would be a volatile week and there would be action on both sides in the coming week. Trade cautiously.

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

an advisory firm)