Markets may remain under pressure

The February 8-14 period under review saw markets upping the volatility to a substantially higher degree. Intraday volatility with net changes on a daily basis saw markets tread in dangerous waters. It hurts investors on all fronts and particularly the Mid-cap and Small-cap space, which has held good ground so far, gave way this time around. In particular, the focus was the PSU sector, which saw big losses across the board. The railway stocks, financial companies like IREDA, defence sector stocks and power stocks all were at the receiving end. Markets lost on two of the five trading sessions and gained on three. What one saw on Wednesday was markets opening deep in the red on the back of Dow Jones and then recovering to close positive. At the end of the period, BSE Sensex was down 329.17 points or 0.46 per cent to close at 71,822.83 points, while Nifty lost 90.45 points or 0.41 per cent to close at 21,840.05 points.

Dow Jones lost on two of the five trading sessions and gained on three sessions. Last night was a bad day at the US markets as Dow lost 524 points. At the end of the period under review, Dow was down 510.87 points or 1.32 per cent to close at 38,272.75 points.

RBI at the end of its bi-monthly monetary policy review meeting which ended on Thursday (February 8) kept repo rates unchanged at 6.5 per cent. The rates have been kept unchanged from February 23. Inflation has been moving down and this is a cause for comfort for the central bank.

There were four listings on the main board during the period under review. The first was from Apeejay Surrendra Park Hotels Limited which had issued shares at Rs155. Shares of the company listed on Monday (February 12) and closed day one at Rs203.45, a gain of Rs48.45 or 31.25 per cent. By Wednesday, the shares were virtually flat and closed at Rs203, a gain of Rs48 or 31 per cent.

Wednesday (February 14) saw three listings and they were certainly not the best that one has seen in a very long time. The first was RP Tech Ltd, which had issued shares at Rs311. The discovered price was Rs335, a gain of Rs24 or 7.71 per cent. At the end of the day, the share closed substantially lower at levels of Rs320.10, a gain of Rs9.10 or 2.92 per cent.

The second of Wednesday’s listings was from Capital Small Finance Bank Ltd, which had issued shares at Rs468. The discovered price was Rs435, a loss of Rs33 or 7.05 per cent. The share slipped further during the day and made a low of Rs421.10. It recovered from here to close around the open at Rs436.05, a loss of Rs31.95 or 6.82 per cent.

The third of Wednesday’s listings was from Jana Small Finance Bank Ltd, which had issued shares at Rs414. The listing price was Rs396, a loss of Rs18 or 4.34 per cent. The share lost sharply as the day progressed and made a low of Rs365. The share closed marginally higher than the low at Rs366.80, a loss of Rs47.20 or 11.40 per cent.

These three listings show one thing clearly that primary markets are overheated and the valuations which are being asked for are unrealistic. There is no comfort in the valuations and one bad day at the bourses can knock the company off its pedestal. Time for promoters and merchant bankers to pull up their socks and ensure that they and their clients do not become greedy or it would become a case of the chicken that lays the golden egg being killed.

The primary issue and offer for sale from Entero Healthcare Solutions Ltd, which closed on Tuesday (February 13), struggled to get fully subscribed. The issue was subscribed 1.56 times overall with QIB portion subscribed 2.29 times, HNI portion undersubscribed at 0.22 times and Retail portion subscribed at 1.38 times. There were 1,29,866 applications in all. Considering that the issue was for about Rs1,600 crore, the total number of applications shows that the response was poor.

Coming to the February 15-21 period, the markets may remain under pressure. The high volatility witnessed during the week would be the order of the day. Markets are yet to find a sustainable level for themselves. Levels of 22,126.80 on Nifty and 73,427.59 points on BSE Sensex seem a distant dream at the current point of time. Decent support exists around 21,500 on Nifty and at 70,800 points on BSE Sensex and these were levels from which they bounced today. The next time they come to these levels it may not be the case and markets may give way. The next level of support would then be at levels of 21,200 and 69,850 range, which would act as solid support for the time being. Depending on how markets behave, future movement in key indices would be decided.

The strategy would be to buy large-caps on sharp declines and sell on any meaningful rallies. Suffice to say sell on rallies and buy on large dips. Trade cautiously.

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