Strong rebound likely, mkts awaiting confirmation

Markets have been struggling on the back of overseas cues. Initially they were virtually flat in the period 6th to 12th October, but then fell sharply on Monday and Tuesday before finally showing some recovery on Wednesday. Very clearly markets have been under pressure and the period under review ended with losses of 439.56 or 0.76 per cent on BSE Sensex to close at 57,625.91 points and 150.70 point or 0.88 per cent to close at 17,123.60 points on Nifty. Markets lost on three of the five trading sessions and gained on two.

Dow Jones had a torrid period losing on four of the five trading sessions. The fifth day of gains was just about a flat day with gains of a mere 36 points. Dow lost 1,077.79 points or 3.69 per cent to close at 29,239.19 points.

In primary market news, the fresh issue from Electronics Mart Limited received overwhelming support and was subscribed 75.78 times. The QIB portion was subscribed 178.63 times, HNI portion was subscribed 67 times and Retail portion was subscribed 20.77 times. There were 20.46 lakh applications. The issue which was for Rs500 crores, garnered response for roughly Rs26,700 crores including anchor. The other issue from Tracxn Technologies Limited which had tapped the capital markets with its offer for sale of 3,86,72,208 equity shares in a price band of Rs75 to 80 received tepid response. The issue had opened on Monday, the 10th of October and closed on Wednesday the 12th of October. The issue was subscribed overall two times with QIB portion subscribed 1.66 times, HNI portion was undersubscribed at 0.80 times and Retail portion subscribed 4.85 times. There were 85,533 applications in all. The issue was overpriced and did not leave anything on the table for investors, which led to the poor response.

In what could be termed as most unexpected, Nykaa declared a bonus issue of five shares for every share held even before completing its first year of listing on the bourses. Considering the fact that it is yet to demonstrate sustained profitability and growth, this seems out of place. Normally one sees bonus issues being done from profits which are capitalised. Here the company is doing this from the reserves on account of issue price premium. While it may not be fair or correct to compare this company with what Reliance Power did, the idea is to keep investors in the company as the lock-in is about to expire, as shares were listed on 30th November 21. Further when the price of the share ex-bonus would trade in the region of Rs200-250, more retail investors would get sucked into the web that the company is weaving. Nykaa share price has been under pressure and in the last three days the share has lost another Rs31.35 to close at Rs1252.95. The 52-week low is at Rs1208.40.

Results from TCS have been better than expected. The company has declared a dividend of Rs8 per share. Wipro declared their results on Wednesday and they seemed to be under pressure. The EPS has fallen for the quarter ended September 23 when compared to September 22. Infosys would be declaring its results on Thursday, the 13th of October.

Coming to the markets in the period 13th to 19th October, we would be driven by volatility and US markets. Inflation data is the key and it is expected that inflation in the US has fallen and the announcement of the same could give a boost to the markets in the coming period. How much and how soon is only speculation, but it appears that the markets are set to rebound.

The previous week's highs were made at 58,578 points and 17,428 points on the BSE Sensex and Nifty respectively. These would be strong resistances in the week ahead which is likely to be a week of volatility and markets testing ones' patience. Markets have resistance at 17,350-17,450 on Nifty and 58,300-58,500 on BSE Sensex. If these levels hold and sustain and the previous week's highs are crossed, we could have a scenario where we travel another 300-400 points on Nifty and 1,000-1200 points on BSE Sensex.

On the support side, levels of 16,750-16,800 and 56,400-56,550 would be very strong supports. If for any reason they are violated, there could be a short-term market meltdown which could cause another 2 per cent fall swiftly. The possibility of this happening seems remote unless something dramatic happens in the US. The strategy for the week should be to buy on dips and sell on strong rallies as the possibility of markets rebounding seems greater than falling or correcting.

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