Time for retail investors to book profits in markets

Caution Alert:

♦ Markets remain under pressure

♦ Investors prefer to sell on rally

♦ The lows made on Monday would act as supports

♦ Primary mkt active

The August 1-7 period under review was a potboiler. It had huge volatility and shook markets to its core. The long-awaited correction, which many people have been talking about, that’s finally happened. The intensity of the same was unprecedented. It began on Friday and then shook markets badly on Monday. Tuesday was a wild day with markets recovering sharply and then closing in the red. Wednesday saw markets again gaining and closing with substantial gains for the day. At the end of the period, markets gained on two of the five trading sessions and lost on three. BSE Sensex lost 2,273.33 points or 2.78 per cent to close at 79,468.01 points, while Nifty lost 653.65 points or 2.62 per cent to close at 24,297.50 points.

Dow Jones after touching a high of 41,376 points on July 18, has been facing turbulent times. It lost 1,745.67 points or 4.28 per cent to close at 38,997.66 points. Dow lost on three of the five sessions and gained on two. The meltdown in markets has been global and there have been many reasons attributed to it. Some of these include Japan raising interest rates to 0.25 per cent from having zero percent for many decades. This has affected the carry trade. Secondly the US FED decided to keep interest rates unchanged and this caused worry in the US markets. Call it by any name and attribute any reason for the fall, markets were overvalued and overbought. They needed to correct and they have done so. What next is the key going forward.

Our markets made new intraday highs on Thursday (August 1), which was the start of the period under review. The new intraday high on BSE Sensex was at 82,129.49 points, while the closing high was at 81,867.55 points. Similar levels on the Nifty were at 25,078.30 points and 25,010.90 points. Friday was a sea of blood and markets fell across the board. What happened on Monday, shook the markets. We lost 2,222 points on BSE Sensex and 662 points on Nifty. This can only be compared with the fall one saw on June 4 when results for the general elections were announced and were well below the exit poll announcements made on Saturday (June 1). What investors, who have come to the markets post-Covid, saw was probably the first correction ever. Till now it has been party time and one comes across many people who say they are gainfully employed and do trading in the stock market for a living.

Market is a great teacher as it teaches one and all. While making money is easy, retaining the same and surviving market falls is an art. This teaching and learning will now begin after roughly 4.5 years since Covid began in March 2020. Tough times are here. The lows made on Monday were at 78,295.86 points on BSE Sensex and at 23,893.70 on Nifty. These would act as supports on the downturn while immediate resistance would be at 24,500-24,600 points on Nifty and at 80,000-80,300 points on BSE Sensex.

Primary markets have been very active and we saw one issue being listed on Tuesday. Besides this we saw two issues open and close for subscription, while another two issues are currently open. Yet another issue would be opening shortly.

The issue from Akums Drugs and Pharmaceuticals Limited listed on the bourses on Tuesday (August 6). The company had issued shares at Rs679. The discovered price was Rs725 on both the stock exchanges. The share hit the upper circuit at Rs797.45 on BSE and Rs797.50 on NSE. It closed a tad lower at Rs796.25, a gain of Rs117.25 or 17.26 per cent. On Wednesday, the share traded higher and touched Rs824, but closed marginally lower than the previous day at Rs791.70.

The issue from Ceigall India Limited was oversubscribed 14.05 times. The issue was open from Thursday (August 1) to Monday (August 5). The price band was Rs380-401. The QIB portion was subscribed 31.26 times, HNI portion was subscribed 14.85 times and Retail portion was subscribed 3.88 times. There were 11.48 lakh applications.

The issue from Ola Electric Mobility Limited was open from Friday (August 2) to Tuesday (August 6). The price band was Rs72-76. The issue was subscribed 4.47 times with the QIB portion subscribed 5.53 times, HNI portion was subscribed 2.52 times and Retail portion was subscribed 4.11 times.

Shares of Ceigall India Ltd would list on Thursday (August 8), while that of Ola Electric would list on Friday (August 9).

The issue from Unicommerce Esolutions Ltd opened on Tuesday (August 6) and would close on Thursday (August 8). At just about the close of the second day of subscription, the issue was subscribed 11.23 times overall. The QIB portion was subscribed 0.756 times, HNI portion 17.17 times and Retail portion was subscribed 33.71 times.

The issue from Brainbees Solutions Ltd is currently on. The issue had opened on Tuesday (August 6) and would close on Thursday (August 8). The company is an online and off-line retailer of accessories, clothes and everything that mothers need, new born babies and kids wear up to 12 years of age. They have a popular website firstcry.com. The price band of the issue is between Rs440-465. The company is currently loss making and is yet to make profits. It’s a one-of-a-kind company and has a head start in business. The issue at almost the end of the 2nd day of subscription was subscribed 0.29 times overall with QIB portion subscribed 0.03 times, HNI portion subscribed 0.28 times and Retail portion subscribed 1.04 times.

There is another issue which would open on Monday (August 12) and close on Wednesday (August 14). The issue is from Saraswati Saree Depot Limited and the price band is Rs152-160. The company is into the wholesale business of selling sarees and its predominant markets are Maharashtra. The company reported sales of Rs610 crore for the year ended March 24 and an EPS of Rs8.92. The PE band for the issue is 17.04-17.94, which is competitive with that of Sai Silk, which is a retail brand based in South India. The wholesale and retail businesses are quite different in nature.

The August 8-14 period ahead would end just ahead of the Independence Day holiday, putting pressure on markets leading to squaring up of positions. Markets are under pressure over the last couple of days and we have not yet recovered from the selling pressure. Markets are likely to remain under pressure with the scenario becoming one where it is a ‘Sell on rally’ in the markets. It would make sense for investors to start booking profits if not already done and start taking some money off the table. Trade cautiously.

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