Investors wary of mkt direction

The first major result from IT major TCS would be announced on Tuesday (Oct 11) post market hours. The IT sector has been under pressure

Immediate Rebound Unlikely

♦ 4 listings took place last week

♦ Strong support has been broken

♦ It would make much more difficult for markets to rebound

♦ Levels of 19,600-19,650 for Nifty and 65,700-65,850 pts for Sensex would be tough

The period September 28-October 4 under review witnessed the markets under pressure. September futures saw markets lose ground on the last day of the September F&O series, followed by gains on the first day of October futures new series beginning on Friday. The remaining two days saw markets falling and breaking crucial levels of support. At the end of the four-day week, they gained in just one day and lost in three sessions. BSE Sensex was down 892.65 points or 1.35 per cent to close at 65,226.04 points, while Nifty lost 280.35 points or 1.42 per cent to close at 19,436.10 points.

Dow Jones lost on four of the five trading sessions and was down 616.40 points or 1.83 per cent to close at 33,002.38 points. The way Dow is behaving over the last couple of weeks is unnerving and causing concern in world markets.

Indian Card Clothing wants to throw out small shareholders and therefore proposed a resolution to change the face value of shares of its listed entity from Rs10 to Rs2,000 per share. The postal ballot for the same was voted against by the minority shareholders, but was carried as the promoters own the majority of the shares in the listed entity. The 6,666 shareholders representing the promoters and owning 40 lakh shares voted in favour, while 2,89,361 shareholders from the minority or public shareholders voted against the resolution. This amounts to 97.75 per cent of the public shareholders. Post this event the company will consolidate shares into a face value of Rs2,000 per share, which means theoretically the share price, which is currently around Rs260 would become Rs52,000.

All those having less than 200 shares or in multiples thereof would be consolidated and sold in the market. Such a large sale would disrupt the share price and cause loss to the minority shareholders. At the same time this would give an undue advantage to promoter shareholders to increase their holding without any price appreciation to the remaining shareholders. The act of the promoters is to bring about the first process of delisting without going through the process and more importantly giving fair value to minority shareholders. This is nothing short of ‘Oppression of minority shareholders’. Hope the regulator and regulating agencies takes note of the voting pattern and ensures justice for the oppressed shareholders.

The primary market rush continues unabated. There were four listings in the period under review. The first share to list was Yatra Online Ltd, which had issued shares at Rs142. The share debuted at Rs130 and closed day one at Rs135.95, a loss of Rs6.05 or 4.27 per cent. On Wednesday, the share lost some further ground and closed at Rs130.75, a loss of Rs11.25 or 7.92 per cent.

The second share to list was JSW Infrastructure Ltd, which had issued shares at Rs119. The share listed on Tuesday (October 3) at Rs143 and closed day one at Rs157.30, a gain of Rs38.30 or 32.18 per cent. On Wednesday, the share gained further to close at Rs164.00, a gain of Rs45 or 37.81 per cent.

The third share to list was Manoj Vaibhav Gems N Jewellery Ltd, which had tapped the capital markets with its issue at Rs215. The share listed at Rs215 on Tuesday and closed listing day at Rs215.65, a gain of Rs0.65 or 0.30 per cent. On Wednesday, the share slipped and closed at Rs203.45, a loss of Rs11.55 or 5.37 per cent.

The fourth share to list was Updater Services Ltd, which had issued shares at Rs300. The share listed at Rs299.90 on BSE and Rs285 on NSE on Wednesday. At close of day, the share had slipped and closed at Rs283.85, a loss of Rs16.15 or 5.38 per cent.

Coming to the October 5-11 period ahead, the markets would be volatile and choppy. During the period gone by, the strong support has been broken and would make markets that much more difficult to rebound. Levels of 19,600-19,650 on Nifty and 65,700-65,850 points on BSE Sensex would be tough and difficult to cross. Temporary support exists at 19,200 on Nifty and 64,500 points on BSE Sensex, while solid support is available much lower at 18,800-18,850 points on Nifty and 63,300-63,450 points on BSE Sensex. The first major result from IT major TCS would be announced on Tuesday (October 11) post market hours. Concerns have been raised on the sector and the results could add to the concerns.

The other tech companies have yet to announce dates. The strategy for the period ahead would be to continue to sell on rallies and only look to buy if markets react or correct sharply. Value buying at these levels should be avoided. The two heavyweights in Nifty, HDFC Bank and Reliance Industries are just nor ready to move and this is putting great pressure on Nifty and its constituents to gain ground. Their participation and turning positive in momentum are imperative if Nifty has to have meaningful gains. Trade cautiously.

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