Stock markets likely to swing in a broad range
A key event in the period under review would be the RBI MPC meet held from 6th to 8th June. The committee is expected to raise key interest rates by 40 to 50 basis points.
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Markets in the period under review 26th May to 1st June performed on expected lines. They made a bottom on Thursday intraday and rallied for the next three days. Tuesday saw markets correcting with the same extending into Wednesday as well. Monday was the super gainer for markets. The BSE Sensex gained 1,631.81 points or 2.95 per cent to close at 55,381.17 points while NIFTY gained 496.95 points or 3.01 per cent to close at 16,522.75 points. Markets continued to remain choppy and volatile. Markets were up for three days and lost for two days.
Dow Jones gained for the first three days of the period under review. Monday was a holiday and Tuesday markets reversed the winning streak. It gained 1,059.06 points or 3.32 per cent to close at 32,990.12 points. Whether the sharp gains in India and Dow being closed, is related or not will remain a mystery. However, we falling on Tuesday and Dow following suit was more or less on expected lines.
In primary market news, we saw the issue from Aether Industries close for subscription on Thursday. It had opened for subscription on Tuesday the 24th of May and closed on Thursday the 26th of May. The price band was Rs 610-642. The issue was subscribed 6.62 times overall with QIB portion subscribed 19.36 times, HNI portion 2.63 times, Retail portion 1.19 times and Employee portion subscribed 1.12 times. There were 1.85 lakh applications.
There were three listings in the period under review.
The first share to list was from Paradeep Phosphates Limited which had issued shares at Rs 42. Shares closed day one at Rs 43.95, a gain of Rs 1.95 or 4.64 per cent. These shares listed on Friday. At the end of the period under review they lost some ground to close at Rs 42.45, a gain of Rs 0.45 or 1.07 per cent.
The second issue to list was Ethos Limited which had issued shares at Rs 878. Shares closed on listing day Monday at Rs 802.60, a loss of Rs 75.40 or 8.61 per cent. They continued to hover around similar levels and closed on Wednesday marginally higher at Rs 807.10, a loss of Rs 70.90 or 8.07 per cent.
The third and final issue to list was eMudhra which had issued shares at Rs 256. Shares debuted at Rs 271 but closed at Rs 258.85. The gain on listing day on Wednesday was Rs 2.85 or 1.11 per cent.
The applications made in public issues and ultimately left not banked, was becoming a major cause for concern. Ethos was a serious example by itself. The issue was for a fresh issue of Rs 375 crores and an offer for sale of Rs 100 crores. The issue was subscribed 1.10 times and had received 88,476 application forms. Post the closure, this number was reduced to 20,238.
The fall at 77.12 per cent is serious and indicates that all is certainly not well in the system. The issue complied with regulations for subscription with the two merchant bankers to the issue contributing Rs 14 crores each approximately to the issue and completing the process.
Kudos to the market regulator for their prompt action. Fortunately, the regulator has taken cognizance of the issue and also what your columnist had highlighted. With effect from 1st September, applications where the money is not blocked will not appear as bids on the exchange. Concerned intermediaries have three months to set their systems right. This would come as a great relief for all concerned whether it be merchant bankers, promoters or serious investors. Gone would be the days when you could have your cake and eat it too.
A key event in the period under review next week from 2nd June to 8th June would be the RBI meeting of the Monetary policy Committee. The meeting would be held from 6th to 8th June with the press conference on 8th June. The committee is expected to raise key interest rates by 40 to 50 basis points.
The strong momentum has run into resistances at the levels where it was expected. Key resistances which are around the 16500-16,600 levels are exactly where markets turned from. If these are crossed, the next resistance would be 16,850-16925 levels on NSE Nifty. These would correspond to levels of 55,700-56,000 points on BSE Sensex.
The next level for resistance would be 56,500-56,800 points. These levels would continue to act as resistances in the coming period under review as well. Whether these levels particularly the second are reached during the week look doubtful but are mentioned as key extremes. As far as immediate support is concerned, lows of the previous week at 53,400 and 15,900 levels will act as strong support.
Expect markets to continue to swing in the broad range of 15,900-16,700 and 53,800-56,000 in the medium term. Until and unless markets are violated in either direction, this appears the immediate trend.
(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)
