Time to stay on sidelines amid uncertainty in mkts

The August 22-28 period under review saw benchmark indices make new highs all over again. They did so on an intraday basis and closing basis as well. While Wednesday, the last day of the period, appeared to be a volatile day with markets moving in either direction initially, they settled down and closed positive. Markets gained on all five trading sessions and ended with gains of 1,044.70 points on BSE Sensex to close at 81,950.00 points, while Nifty gained 329.80 points or 1.33 per cent to close at 25,150 points.

The primary markets continue to be robust and we have a large number of IPOs happening. During the period under review we had two issues listing, one issue opening and closing for subscription on Thursday, while yet another opened for subscription, but would close on Friday.

The first issue to list was Interarch Building Products Ltd, which had allotted shares at Rs900 per share. The share debuted on Monday (August 26) at Rs1,291.20, a gain of Rs391.20 or 43.46 per cent. The share closed on Monday at Rs1,196.45, a gain of Rs296.45 or 32.93 per cent. Over the next two day, the share lost some ground and closed at Rs1,145, a gain of Rs245 or 27.22 per cent.

The second share to list was Orient Technologies Ltd, who had issued shares at Rs206. The discovered price of the share which listed on Wednesday was Rs290 and thereafter it was locked at upper circuit at Rs304.45, a gain of Rs98.45 or 47.79 per cent. On NSE, the discovered price was Rs288 and the upper circuit was at Rs302.40.

The first issue is from Premier Energies Ltd, which opened on Tuesday (August 27) and would close on Thursday (August 29). The issue consists of a fresh issue of Rs1,291.4 crores and an offer for sale of 3.42 crore shares in a price band of Rs427-450.

The company is an integrated solar cell and solar module manufacturer with 29 years of experience. The company makes PV (photovoltaic) cells and also manufactures solar modules. The company reported revenues of Rs3,143.79 crore for the year ended March 24 and a profit after tax of Rupees 231.36 crore. In the first quarter of the current year, it reported revenues of Rs1,657.36 crore and a profit after tax of Rs196.16 crore. The EPS for the year ended March 24 was Rs6.93, while on a fully diluted basis it was Rs5.48. The PE ratio on this EPS is 77.92-82.12. If one looks at the EPS earned by the company in the first quarter after new capacities were added towards the end of the financial year 2024, the same has improved significantly to Rs5.93 and on a fully diluted basis to Rs4.70. This is significantly higher than the previous full year’s EPS of Rs5.48.

The company is expanding its capacity with its own money as well as the objects of the issue also include expansion. This looks like a good opportunity to participate in a large capacity solar company which is an integrated player and has size and scale besides the experience. One should invest for the medium to long term in the company.

The second company to tap the markets is ECOS (India) Mobility and Hospitality Ltd. The company is offering 1.8 crore shares through an offer for sale in a price band of Rs318-334. The issue opened on Wednesday (August 28) and would close on Friday (August 30). The company offers chauffeur driven mobility providers to corporates in India. The company reported revenues of Rs554.41 crore for the year ended March 24 and a profit after tax of Rs62.53 crore. The EPS for the year was Rs10.42 and the PE band is 30.52-32.05 times. The growth of the company over the last three years has been phenomenal and one wonders whether this growth is sustainable or not.

The Nifty has made new highs on a closing basis as well as on an intraday basis. The new highs are at 25,052.35 points on closing basis and 25,129.60 points on intraday basis. These levels have bettered what was made on August 1. As far as BSE Sensex is concerned, levels of August 1 continue to be the closing and intraday highs even as on date.

The period August 29-September 5 ahead begins with August futures expiring on Thursday (August 29). The current series sees bulls have an upper hand with the series higher by 646.25 points or 2.65 per cent. It appears almost impossible for the bears to do anything in the series except manage to pull back something. For the record it would go down as one more series win for the bulls.

The strategy for the week ahead would be to ride the rally as far as it can go. While there have been days in the previous period where markets have been flat, the momentum is with the bulls and they are able to pull a rabbit out of the hat and keep momentum moving. In terms of resistance, while we are around the highs, markets have not been able to move ahead sharply as yet. Whether the new series beginning on Friday would bring about sharp moves, is yet awaited. In terms of support, solid support exists at levels of 24,500 on Nifty and around 80,000 on BSE Sensex. The strategy would continue to be to make the most of it and wait on the sidelines for any confirmation of weakness when sales could be pressed. Till then trade cautiously and keep overnight positions light.

(The author is the founder of Kejriwal Research and Investment Services,

an advisory firm)