Sharp intra-day moves amid high volatility

For markets to move up meaningfully, the resistance levels have to be crossed and sustained over the next couple of days

Primary Market

• Last week, there’re one listing and 2 new issues
• 3 issues next week
• ESAF Small Finance Bank Ltd’s issue opens on Friday and closes on Tuesday
• Protean EGOV Technologies Ltd’s IPO opens on Monday and closes on Wednesday

The period October 26-November 1 under review was choppy and volatile. The period began with October futures expiring on Thursday (October 26). There was sharp selling on expiry day and Nifty lost 265 points on Thursday. The series lost 666.30 points or 3.41 per cent to close at 18,857.25 points. Friday saw the start of the November series and markets were positive. The same mood continued on Monday and then markets lost on the remaining two days of the week. At the end of the period, markets had gained on two of the five sessions and lost on three sessions. BSE Sensex was down 457.73 points or 0.71 per cent to close at 63,591.33 points, while Nifty was down 133 points or 0.70 per cent to close at 18,989.15 points.

Dow Jones lost on three of the five trading sessions continuously and then staged a recovery on the next two days. At the end of the period, it was down 88.51 points or 0.27 per cent to close at 33,052.87 points.

In primary market news, there’s one listing and two new issues, one of which opened and closed during the week, while the other would close on Thursday (November 2). In the period ahead we have three issues which would open and close for subscription.

Shares of IRM Energy Ltd, which were issued at Rs505 listed on Thursday (October 26). The discovered price was Rs479 on the BSE and the share closed at Rs472.95 on debut day, a loss of Rs 32.05 or 6.34 per cent. By Wednesday, the shares had lost further ground and closed at Rs444.10, a loss of Rs60.90 or 12.06 per cent. The share performance has been impacted after the announcement of the Electric Vehicle policy in Delhi and NCR regions. This saw IGL AND MGL share prices getting impacted. For the records, it may be stated that IRM is not in close proximity to Delhi NCR and there would be no impact of this policy.

The first issue is from Cello World Ltd, which is into three broad verticals of manufacturing. The first is Consumer ware, the second is writing instruments and the third is moulded furniture. The company reported revenues of Rs1,796.69 crore for the year ended March 23. It reported a net profit of Rs285 crore. The fully diluted EPS for the period was Rs13.17, and the PE Price band for the issue is 46.85-49.20 times its March 23 earnings. The company enjoys robust growth and healthy margins, which make the company a respected brand and choice for investment. As the issue is an offer for sale there are no objects of the issue. The company has detailed an expansion plan in its various verticals and would be setting up a third hub in Falana, Rajasthan after hubs in Daman and Uttarakhand. Investment is warranted looking at the growth prospects of the business.

At almost the last couple of hours bidding left, the issue was subscribed 37.87 times overall with QIB portion subscribed 105 times, HNI portion subscribed 24 times and Retail portion subscribed 2.86 times.

The second issue is from the consumer company, Honasa Consumer Ltd. The company is tapping the markets with its fresh issue of Rs365 crore and an offer for sale of 4.12 crore shares in a price band of Rs308-324. The company is a retailer of baby care, face care, body care, hair care, colour, cosmetics and fragrances segment. The issue opens on Tuesday (October 31) and closes on Thursday (November 2). The company reported revenues of Rs1,492 crore for the year ended March 23 and a restated net loss of Rs11.52 crore. As the EPS is negative, the issue has no PE band as the same is infinite.

The issue is one from the new age companies and is primarily an exit for existing investors. 78.55 per cent of the proceeds at the top end of the price band would go to selling investors, while a mere 21.45 per cent would go to the company. This company has a long way to go to establish its credentials as three of its six brands are acquisitions and need to establish the growth trajectory. The company has a long way ahead and needs to perform. The issue is 75 per cent reserved for QIBs and would get subscribed, it would need a few quarters of consistency and performance before the share is actively traded and established. Investors with a high-risk reward ratio alone should look at the above issue.

At close to the end of day two of bidding, the issue was subscribed 0.68 times overall with QIB portion subscribed 1.02 times, HNI portion subscribed 0.07 times and Retail portion subscribed 0.57 times. There were 38,523 applications in all. This is an issue best left to the ‘Qualified’ Institutional Bidders.

There are two issues which would open in the period ahead. The first is from ESAF Small Finance Bank Ltd, which is tapping the markets with its fresh issue for Rs390.70 crore and an offer for sale of Rs46.30 crore. The issue opens on Friday (November 3) and closes on Tuesday (November 7). The price band is Rs57-60. The company is a small finance bank.

The second issue is from Protean EGOV Technologies Ltd, which is tapping the capital markets with its offer for sale of 61.91 lakh shares in a price band of Rs752-792. The company is into e-governance infrastructure creation and management and is an integral part of the government’s initiative of digitising India. The issue opens on Monday (November 6) and closes on Wednesday (November 8).

Coming to the markets in the period ahead, expect volatility with sharp intraday moves to dominate markets. Intraday lows made on Thursday would act as strong support in the short term. These were at 63,092.98 points on BSE Sensex and at 18,837.85 points on Nifty. The upside is currently capped at levels of 19,200-250 points on Nifty and at 63,175-63,350 points. For markets to move up meaningfully, these levels have to be crossed and sustained over the next couple of days. Results season is on and while we have a few points of outperformance in them, there is no broad trend to confirm that India Inc has had a stellar performance. Trade cautiously.

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