Markets to reel under pressure

The period December 29-January 4 under review had all the action and drama one could think of. The period started with December Futures expiring on Thursday. One would have expected markets to fall on that day, but they gained. Friday was the first day of the new series and the last trading day of the calendar year 2022, markets fell. Monday was the first trading day of the calendar year when major global markets were closed, we gained. The rally continued into Tuesday. On Wednesday, which was the last trading day of the period under review, we lost very sharply. At the end of it all, markets were down marginally, but weak significantly on technical factors. BSE Sensex lost 392.55 points or 0.64 per cent to close at 60,657.45 points, while Nifty lost 107.05 points or 0.59 per cent to close at 18,042.95 points. Our markets gained on three of the five trading sessions.

Dow Jones lost 105.19 points or 0.32 per cent to close at 33,136.39 points. Dow lost on three of the four sessions, in which trading took place. Readers would recall that Monday was a trading holiday in the US.

For calendar year 2022, BSE Sensex gained for the seventh year in a row and was up 2,587.22 points or 4.44 per cent for the year at 60,840.74 points. Nifty gained 751.25 points or 4.33 per cent to close at 18,105.30 points. Bank Nifty was a very important sector in the domestic markets and gained handsomely. It was up 7,504.75 points or 21.15 per cent to close at 42,986.45 points. In comparison, Dow Jones lost 3,425.86 points or 9.43 per cent to close at 32,912.44 points. Nasdaq was indeed very weak and lost 5,178.52 points or 33.10 per cent to close at 10,466.48 points. Looking at what happened in the US, India is clearly an out performer.

If one looks at it in another way, had it not been for the BFSI space, our benchmark indices would have been in the red like the rest of global markets.

In primary market news, there were three listings. The first to list was KFIN Technologies Limited, which had tapped the markets with its offer for sale of Rs1,500 crore at a price of Rs 366. The share which listed on Thursday had a discovered price of Rs369, but it closed on listing day at Rs364, a loss of Rs2 or 0.54 per cent. At the end of the period under review, on Wednesday the share slipped further and closed at Rs356, a loss of Rs10 or 2.73 per cent.

The second share to list was ELIN Electronics Ltd, which had tapped the markets with a fresh issue and an offer for sale at Rs247. The discovered price of the share which listed on Friday was Rs242.80. It closed on debut day at Rs227.80, a loss of Rs19.20 or 7.77 per cent. By Wednesday, the share gained marginally and closed at Rs229.80, a loss of Rs17.20 or 6.96 per cent.

Radiant Cash Management Services Ltd had a poor subscription and the size of issue was reduced. The fresh issue which was for Rs60 crore was reduced to Rs54 crore, while the offer for sale of 331.25 lakh shares was reduced to 212.22 lakh shares. Further, even though the anchors were allotted shares at the top end of the price band of Rs99, the remaining investors were allotted at the lower end of the price band of Rs94. Merchant bankers were also allotted shares as part of their underwriting arrangement.

he share debuted on the bourses today at Rs99.30, a gain of Rs5.30 or 5.63 per cent. They closed even higher at Rs104.70, a gain of Rs10.70 or 11.38 per cent. One should ignore the gains today as the float in the stock has reduced by more than 1/3rd as the issue size was reduced and interested intermediaries would have to present a solid picture considering the poor response in the subscription. Allow the issue to settle before looking at it.

2022 has been a tough year for the primary market as well. The amount of funds raised were under Rs 60,000 crs. The average gains made on listing day were around 10% against 32% made in 2021. In the year 2022, of the 38 IPOs, 17 gave a return of about 10%. Very clearly investors have reason to complain that promoters and merchant bankers of issues are leaving nothing on the table for them. No wonder of the recently listed 9 issues, all are trading at a discount to the issue price.

Coming to the markets in the period January 5-11, they would be under pressure based on what we saw in the last couple of days. The markets failing to cross 18,300 on Nifty and 61,500-61,700 on BSE Sensex, is a sign of weakness.

For the momentum to continue we need to cross these levels initially, sustain them and move up to touch and cross highs made on December 1. Secondly results season kicks in with the IT pack declaring results in the coming week. TCS does so on January 9, HCL Tech and Infosys on January 12 and Wipro on January 13.

The momentum seems to be slipping with passing time and it would be tough for markets to move up sharply. There could be a rally pre-budget or post budget, but that is some time away. Gut feel says that the best could be behind us. Use rallies to sell and wait for dips to relook at the markets. We are awaiting a sharp dip, which could take us to new lows of the last six weeks or so. Trade cautiously.

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