Mkts trading in a broad zone

The period under review during July 8-14 saw markets move all over the place. Thursday saw markets gain followed by losses on Friday. Monday saw markets open positive, move up further and then give up gains and close with losses. Tuesday saw markets post strong gains. Wednesday saw markets open weak and then move up positively to gain ground. However, the gains on Tuesday and Wednesday were not enough to make the benchmark indices end in positive territory. The period under review ended negative as BSE Sensex lost 150.71 points or 0.28 per cent to close at 52,904.05 points. Nifty lost 25.70 points or 0.16 per cent to close at 15,853.95 points.

In primary market news, the offer for sale from road developer GR Infraprojects received excellent response and was subscribed 102.58 times. The company had launched its IPO for sale of 1.15 cr shares in a price band of Rs 828-837. The QIB portion was subscribed 168.58 times, HNI portion was subscribed 238.04 times, Retail portion was subscribed 12.57 times and Employee portion was subscribed 1.37 times. There were 23.80 lakh applications.

The offer for sale from Clean Science Technology Limited which had tapped the markets with its issue for Rs 1,546.22 crs in a price band of Rs 880-900 was oversubscribed 95.54 times. The QIB portion was subscribed 159.93 times, HNI portion was subscribed 211.12 times and Retail portion was subscribed 9.20 times. There were 26.94 lac applications received in the issue.

Both the issues, GR Infra and Clean Sciences are expected to list on Monday (July 19). Zomato Limited has opened for subscription on Wednesday and would close on Friday (July 16). The issue would be well received and be subscribed many times over. The anchor allocation saw 100 anchor investors comprising of 186 entities being allotted 55.21 cr shares at Rs 76, at the top end of the price band.

The issue from Tatva Chintan Pharma Chem Limited would open on Friday (July 16) and close on Tuesday (July 20). The issue consists of a fresh issue of Rs 225 cr and an offer for sale of Rs 275 cr, in a price band of Rs 1,073-1,083. The company is a niche speciality chemical company manufacturing SDA (structure directing agents), PTC (Phase transfer catalysts), PASC (pharmaceuticals and agrochemicals intermediates) and Electrolyte salts for SCB. The revenues of the company were Rs 300.36 cr for the year ended March 2021 and Net Profit after tax was Rs 52.40 cr. The company reported an EPS of Rs 26.02 for the year ended March 2021. The PE band is 41.24-41.62 times based on March 2021 numbers. The company is the largest manufacturer in its category in the country and one of the leading players in the world as well.

Trading pattern suggests that markets are now trading in a broad zone which could be classified as 51,700-53,100 on BSE Sensex and on Nifty, the range would be 15,450-15,950. To break out on either side, would need strong news flow which looks unlikely in the immediate current scenario. At the end of the current period, we are closer to the upper end of the band but not quite there. There is tremendous resistance at these levels and markets are just not able to break out. It maybe noted that the levels reached on the previous Wednesday have not been breached in this period.

The period under review for the next week would end one day earlier on July 20 with Wednesday (July 21) being a trading holiday. While we have closed marginally lower, we have seen significant gains on Tuesday and Wednesday. Going forward there could be a correction on account of profit taking on Friday. Further with Wednesday being a holiday in India, and global markets open, there is a tendency to square off positions and remain light. With two such events in the next four days, markets could see profit taking and be choppy and volatile.

The strategy should be to continue to book profits on rallies and wait for sharp dips to buy. In case the same does not happen, stay on the side-lines. The shift from mid and Smallcap stocks to large-cap stocks should continue.

(The author is the founder of Kejriwal Research and Investment

Services, an advisory firm)