Markets May Remain Volatile, Choppy

The domestic stock markets have been under pressure in the September 5-11 period under review. They gained on two of the five trading sessions and lost on three sessions. What was the highlight was the sharp crack witnessed on Friday, when markets lost over1.25 per cent. Coupled with the market weakness, one saw the surfeit of IPOs taking its toll. Since Monday (September 9), three issues have opened and closed on Wednesday, while one would be doing so on Thursday. Three more issues are opening in the coming two days. The rush is to beat the September end as all these companies are tapping the markets with audited numbers of March 24.

BSE Sensex lost 829.48 points or 1.01 per cent to close at 81,523.16 points, while Nifty lost 280.25 points or 1.11 per cent to close at 24,918.45 points. Markets have a lot of momentum going for them and even though FPIs have a mixed view on markets with them being buyers over the last two days and sellers over the previous three days, their approach to markets continues to be living by the day. The biggest driver of markets currently continues to be the robust domestic flows to mutual funds who act as a solid defence for any selling that FPIs may do. In such a scenario we need really negative news flow over a couple of days to bring markets down or make them lose momentum.

The IPO market has seen very strong momentum and record subscriptions have been seen. There were three IPOs which opened on Monday (September 9) and closed on Wednesday (September 11). The first of the lot was Bajaj Housing Limited which was oversubscribed 67.28 times overall. QIB portion was subscribed 222.05 times, HNI portion was subscribed 43.85 times and Retail portion was subscribed 7.18 times. There were 86.52 lakh applications in all.

The second issue was Kross Ltd, which was subscribed 17.12 times overall. The QIB portion was subscribed 24.55 times, HNI portion was subscribed 23.16 times and Retail portion was subscribed 10.28 times. There were 12.22 lac applications in all.

The third issue was from Tolins Tyres Limited, which was subscribed 24.13 times overall with QIB portion subscribed 26.72 times, HNI portion subscribed 28.56 times and Retail portion subscribed 20.75 times. There were 12.68 lac applications in all.

The fourth and final issue was from PN Gadgil Jewellers Ltd, which opened on Tuesday (September 10) and would close on Thursday (September 12). The issue close to the end of the 2nd Day was subscribed 6.61 times with QIB yet to apply. QIB typically applies on the third day.

There are three more IPOs slated in the coming days. The first is from Western Carriers Limited which will open on Friday (September 13) and close on Wednesday (September 18). The issue consists of a fresh issue of Rs400 crore and an offer for sale of 54 lakh shares in a price band of Rs163-172. The company is the largest private, multimodal, rail focused 4PL asset-light logistics company in the country. This is based on the number of container volumes handled by private players in Fiscal 23.

The company reported an EPS of Rs10.21 for the year ended March 24. The PE multiple is 15.96-16.85 which seems attractive considering the business and prospects of India becoming a manufacturing hub for many products. The issue looks attractively priced.

The second issue is from real estate developer Arkade Developers Ltd. The issue consists of a fresh issue of Rs410 crore in a price band of Rs121-128. The company is a developer and a re-developer in the suburbs of Mumbai or MMRDA. The company reported revenues of Rs634.73 crores for the year ended March 24. The EPS was Rs8.08 while the PE multiple is 14.98-15.84 based on the EPS for March24. The sector is interesting, the company is debt free but the size being small leaves room for doubt for growth in the medium term.

Coming to the markets, expect markets to remain volatile and choppy going forward. There would be a short-term liquidity crunch in the markets with the bunching of issues. The coming Saturday is the second Saturday and there is a bank holiday on Monday which would not allow the freeing up of money of the applications in these four issues. This could add pressure to the markets on Thursday and Friday in the coming period. Further, markets have recovered from the lows made on previous Friday. However, with global cues, geo-political tension and concerns on the valuation front will keep markets on their toes throughout the period ahead. There would be valuation concerns at every step and people would look out for the impending US FED meeting in the early part of the coming week. Secondly, quarterly results have not been the best and there is concern on this front. All of this would keep the markets on their toes.

The strategy for the week would be to keep overnight positions light and refrain from large positions. Short intra-day trading would be the order of the day. The levels to watch out for would be the highs made on the BSE Sensex and Nifty to act as resistances. On the support side you have multiple levels around 24,800 points on Nifty and 81,100 points on BSE Sensex. If these are violated we have a second level of support at levels of 24,50 on Nifty and at 80,200 points on BSE Sensex. The key would be the outcome of the US Fed meeting. Trade cautiously till the outcome of the meeting in 6-7 days.

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