Investors chary of market direction

In terms of support and resistance, previous tops at 75,124 points and 22,775 would be very strong resistances. On the support side, lows made last week at 71,816 points and 21,777 points would act as strong supports. If these are violated, then one could see markets slipping to 71,100 and to 21,550 points respectively

The period April 18-24 under review was a period of two parts. The first, comprising the first two days of the previous week, i.e., Thursday and Friday, was the usual volatile and choppy period. The next period of Monday-Wednesday saw markets becoming stable and virtually trading in a small narrow intraday range. They did open with upside gaps, but were stable thereafter. The India VIX (volatility index) has crashed to virtually its lowest level in about five years. Some of the reasons could be the fact that the geo-political situation has improved considerably with Israel not responding to Iran as was expected and the markets strongly believing that the present political dispensation would win the general elections for a third term. BSE Sensex gained on four of the five sessions and lost on just one. The gains for the period under review were at 909.26 points or 1.25 per cent at 73,852.94 points, while Nifty gained 265.35 points or 1.20 per cent to close at 22,413.05 points.

Dow Jones gained in four of the five sessions. It was up 704.72 points or 1.86 per cent to close at 38,503.69 points.

The follow on offer from Vodafone Idea Ltd of Rs18,000 crore received excellent response and was oversubscribed. The QIB portion was subscribed 19.31 times, HNI portion was subscribed 4.54 times and Retail portion was subscribed 1.01 times. Overall the issue was subscribed 6.56 times. Shares issued through the FPO would list on Thursday (April 25).

In primary market news, the issue from JNK India Ltd has opened for subscription from Tuesday (April 23). The issue would close on Thursday (April 25). The issue consists of a fresh issue of Rs300 crore and an offer for sale of 84,21,052 shares. The price band is Rs395-415.

The company is into the manufacturing and assembling of process fired heaters, reformers and cracking furnaces (together known as heating equipment). The company has capabilities in thermal designing, engineering, manufacturing, supplying, installing and commissioning. This equipment is required in refineries, petrochemicals and fertiliser plants. The company reported revenues of Rs407.30 crore for the year ended March 23 and a profit after tax of Rs46.36 crore. The EPS for the year was Rs9.51. For the nine months ended December 23, the revenues were Rs253.39 crore and the profit after tax was Rs46.21 crore. The EPS was Rs9.49. Based on the EPS for the full year ended March 23, the PE multiple for the issue is 41.54-43.64. The comparable peers on a limited basis for the company are Thermax and BHEL, but limited to the supply of heat exchangers and not the balance business that these companies do. The company is into an interesting business and offers an investment opportunity for the medium to long term.

At the time of writing this article towards the second half of the second day of the issue opening, the issue was subscribed 0.91 times, with QIB portion subscribed 0.66 times, HNI portion subscribed 0.91 times and Retail portion subscribed 1.05 times.

Coming to the markets in the April 25- May 1 period ahead, we would have a four-day trading session with Wednesday being a holiday on account of May Day. Earlier, the period would begin with April futures expiring on the very first day of the new period on Thursday (April 25). It’s neck-to-neck between the bulls and the bears and the series is wide open. The difference between the opening of the series at 22,326.90 points and the close on Wednesday is a mere 86.15 points or 0.39%. While the bulls have pulled it back over the last three days, it’s still anybody’s game currently. Remember that the final closing price is based on the last 30 minutes weighted average of trades on Nifty. Expect that period post 2:30pm to be choppy and volatile.

The second phase of voting would take place on April 26. The first has been completed and there would be a total of seven phases with the last being held on June 1. Counting of votes would take place on June 4.

Post expiry, markets would be open for three sessions. In terms of support and resistance, previous tops at 75,124 points and 22,775 would be very strong resistances. On the support side, lows made last week at 71,816 points and 21,777 points would act as strong supports. If these are violated, then one could see markets slipping to 71,100 and to 21,550 points respectively. While markets are currently over the last three days in a virtual zero or low volatility zone, not sure how long this would last. Trade cautiously.

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