Continue trading in large cap stocks

The US FED in its meeting kept interest rates unchanged in a band of 5.25% to 5.50%. Post the meeting, indications remain strong that there will be three rate cuts later in the year, an expected event which is not allowing markets to fall in the US.

The period under review from 21st March to 27th March was a truncated one with a mere four trading sessions. Markets gained on three of the four sessions. BSESENSEX was up 894.62 points or 1.24 per cent at 72,996.31 points while NIFTY was up 284.55 points or 1.30 per cent up at 22,123.65 points. Markets have been choppy and wild and have been changing directions midway through the day. Money making is more difficult than ever before.

Dow Jones gained on three of the five trading sessions. It was up 171.57 points or 0.44 per cent to close at 39,282.33 points. The US FED in its meeting (on Wednesday the 20th of March) kept interest rates unchanged in a band of 5.25 per cent to 5.50 per cent. This is the fifth straight time that interest rates have been kept unchanged. Post the meeting, indications remain strong that there will be three rate cuts later in the year, an expected event which is not allowing markets to fall in the US.

In primary market news, there was one listing during the week when shares of Krystal Integrated Services Limited listed on the bourses on Thursday, the 21st of March. The company had issued shares at Rs715. The listing price was at Rs795, and the low of the day was at Rs703.05. The share closed day one at Rs712.30, a loss of Rs2.70 or 0.37 per cent. It lost further ground and closed at Rs703.95, a loss of Rs11.95 or 1.67 per cent. There is one main board IPO which has opened on Tuesday the 26th of March and would close on Thursday the 28th of March. The company SRM Contractors Limited is tapping the capital markets with its fresh offer for 62 lakhs shares in a price band of Rs 200-210. The company would raise Rs124 to 130 crores. The company is into the business of construction of roads and tunnels as well as other form of infra structure development.

The company reported an EPS of Rs90 for the year ended March 23 and based on this the PE multiple as mentioned in the basis of issue advertisement is a mouth watering and unbelievable 2.3 times. For a moment, it took me by complete surprise and then I thought that maybe with All Fools Day round the corner in another four days, the company may be doing that. Clarity dawned sooner than later as I managed to figure out that the company has not reduced the EPS by the bonus issue. The EPS should read as Rs 9 and the PE a much more acceptable 23.33 times. One hopes the regulator sees through this glaring mistake of the company and may be an attempt to hoodwink innocent gullible investors.

At about the end of the second day of bidding, the issue was subscribed 14.94 times with QIB subscribed 2.36 times, HNI subscribed 36.4 times and Retail subscribed 12.93 times. The period ahead from 28th March to 3rd April would see futures expire on Thursday the 28th of March, which would also be the last trading day of the financial year 2023-2024. The current value of NIFTY is at 22,123.65 points which is a mere 140.85 points or 0.64 per cent higher than the March series open at 21,982.80 points. With just one day to go, the series is wide open and one could see heightened volatility in the market place. In case there is no verdict by 2.30 pm as to whether bulls or bears are in control, the last half hour could see the fight boiling down to a weighted average of 30 minutes.

Markets in the period ahead will have a trading holiday after one day of trading. Therefore, this would be a four-day trading period. The strategy would be to continue trading in large cap stocks and a very select group of midcap and small cap stocks. Markets have respected the levels of 21,850 points on NIFTY and bounced back. As long as these levels are respected one may continue to remain bullish in the marketplace. Trade cautiously.

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