Markets in jeopardy as FPIs turn net sellers

Results have not been the best, with the slowest growth in 8 quarters makes one believe that upside on growth would be difficult from hereon

The August 16-21 period had a four-trading session week where the benchmark indices behaved differently. While BSE Sensex gained on three sessions and lost on one, Nifty gained on all four trading sessions. The period began with a holiday on account of India celebrating its 78th Independence Day on Thursday (August 15). BSE Sensex gained 1,799.42 points or 2.27 per cent to close at 80,905.30 points, while Nifty gained 626.45 points or 2.59 per cent to close at 24,770.20 points.

In primary market news, we had one listing, one issue opening and closing for subscription and yet another issue opening for subscription today. The issue from Saraswati Saree Depot Limited, which had issued shares at Rs160, listed on Tuesday (August 20). The share debuted at Rs200 and closed at upper circuit of Rs209.95 on day one. The gains made were Rs49.95 or 31.21 per cent. On Wednesday, the share gained further and touched a high of Rs218.80, before profit taking brought the share down to close at Rs199.50, lower circuit. On NSE, the share traded lower at Rs195.09. The gain was Rs35.09 or 21.93 per cent on NSE while it was Rs3.50 or 24.68 per cent on BSE.

The issue from Interarch Building Products Ltd, which opened on Monday (August 19) and would close on Wednesday (August 21), received excellent response. The price band is Rs850-900. The issue consists of a fresh issue of Rs200 crore and an offer for sale of 44,47,630 shares. The issue just before closing on the final day was subscribed 93.54 times overall with QIB portion subscribed 197.29 times, HNI portion subscribed 130.74 times and Retail portion subscribed 19.04 times. There were 24.01 lakh applications in all. The second issue to tap the capital markets is Orient Technologies Limited, which opened its issue on Wednesday (August 21) and would close on Friday (August 23). The issue consists of a fresh issue of Rs120 crores and an offer for sale of 46 lakh shares, in a price band of Rs195-206.

The company is an information technology (IT) solutions provider headquartered in Mumbai. The company reported revenues of Rs602.89 crore for the year ended March 24 with an EBITDA margin of 9.39 per cent and a PAT margin of 6.87 per cent. Their EPS for the year was 11.80 and the PE band is 16.53-17.46. The company has entered the promising and lucrative business of cyber security which is a crucial and fast-growing area and also enjoying higher margins. Close to the end of the first day, the issue was subscribed 4.57 times.

The week ahead would have a couple of mainboard IPOs with their roadshows to be held on Thursday in Mumbai. Details of the price band and issue details would be available tomorrow morning.

The August 22-28 period ahead would have the Jackson Hole meeting take place in the US over the last couple of days of the week. The various governors of Banks would be meeting and the outcome of the same would throw clarity on the much-awaited interest rate cut in the September meeting of the US Fed. The cut happening is discounted, however any ifs and buts about the same could see sharp moves in the markets in the US and India. Further, post the period expiring, we would also see August futures expiring on Thursday (August 29).

FPIs have a negative view on Indian markets currently, and they are sellers on a significantly larger number of days than they are buyers. Friday (August 16) saw them covering their shorts in the future markets as they rose very sharply. Taking that day as an aberration, we find that FPIs continue to be negative. The trading strategy considering that results have not been the best, with the slowest growth in eight quarters makes one believe that upside on growth would be difficult from hereon. The trading strategy would be to sell on strong rallies and use sharp dips to buy select stocks. A little churning of the portfolio would be helpful.

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

an advisory firm)