Weak Listings, Tepid Results Weighing On Mkts

The October 17-23 period under review saw markets under tremendous pressure. Coincidentally, the listing of Hyundai Motor India Ltd (HMIL) on Tuesday (October 22), which happened to be India’s largest ever public issue added to the pressure with its poor listing at the bourses. BSE Sensex lost 1,419.38 points or 1.74 per cent to close at 80,081.48 points, while Nifty lost 535.80 points or 2.15 per cent to close at 24,435.50 points. Mid-cap and small-cap stocks bore the brunt of the selling and were down sharply with Tuesday being a sea of red across the segment. The loss on Tuesday in the BSE-Midcap and BSE-Smallcap was 1,190 points or 2.52 per cent and 2,118 points or 3.80 per cent respectively. Our markets lost on four of the five trading sessions and gained on one. Dow Jones has been relatively steady and gained on three of the five trading sessions, losing on two. Dow was up 184.47 points or 0.43 per cent to close at 42,924.89 points.

Coming to the primary markets we saw the listing of Hyundai Motor India Ltd being held on Tuesday (October 22). Earlier, the issue had closed on Thursday (October 17) for subscription. The issue was an offer for sale of 14.22 crore shares in a price band of Rs1865-1960. The issue was subscribed overall 2.37 times with QIB portion subscribed 6.97 times. The non-institutional portion comprising HNI was undersubscribed at 0.60 times, while Retail was subscribed 0.50 times. The employee portion was subscribed 1.74 times. There were 21.52 lakh applications received in all. On allotment the demand from employees reduced significantly and the bucket which was oversubscribed initially at 1.74 times, was undersubscribed at 78.83. It appears that retail investors looking at the attractive discount have bid in the employee category. Total rejections here in terms of shares were 6,76,886 shares which is more than the bids accepted at 6,13648.

The discovered price was Rs1,931 on BSE, a loss of Rs29 on the issue price of Rs1,960. The closing price was Rs1,820.40, a loss of Rs139.60 or 7.12 per cent. The traded volumes on the counter were pathetic and nothing to write home about. The market jinx attached with large IPOs continues. The string of largest ever issues from Reliance Power, LIC of India, Paytm and now followed by Hyundai Motor India Limited do not augur well for large multinational listings going forward. Today, the share price of Hyundai recovered to close at Rs1,896.70. The share is now lower by Rs63.30 or 3.23 per cent.

The issue from Waaree Energies Ltd, which is tapping the markets with its fresh issue of Rs3,600 crores and an offer for sale of 48 lakh shares in a price band of Rs1,427-1,503 received excellent response and was subscribed 77.85 times with QIB portion subscribed 211.49 times, HNI portion subscribed 64.34 times and Retail 10.44 times. There were 80.29 lakh applications in all.

The week ahead sees the issue from Afcons Infrastructure Ltd, which is tapping the capital markets with its fresh issue of Rs1,250 crores and an offer for sale of 4,180 crores in a price band of Rs440-463. The issue would open on Friday (October 25) and close on Tuesday (October 29). The company is part of the Shapoorji Pallonji group and is into the business of engineering and construction. They have done many prestigious and critical projects in India and abroad. Most recently they have built the world’s tallest single-arch railway bridge over river Chenab in J&K. Notably they have also built the Atal Tunnel in Himachal Pradesh which is the world’s longest highway tunnel above 10,000 feet (3,000 meters). They have execution skills, capabilities and equipment to handle almost anything. The price at which the shares are being offered are attractive and there is money on the table for the investors for the short, medium and long term.

The period ahead (October 24-30) would end one day before October futures series for October end. At current value, the series so far is down by 1,776.05 points or 6.76 per cent. It’s a big loss and almost impossible to make up. At best what may happen is that bulls fight back and recover some lost ground. Markets have become weak and the selling witnessed in small-cap and mid-cap segments is cause for concern as this segment is most invested in by retail investors. Results declared so far do not give comfort and it appears that this quarter would also see muted growth as the previous nine quarters have done. In terms of support, the levels of the broad band that we were trading in of 24,700-750 on the lower side and 25,300-400 on the upper side, has been broken on the downside. The lower end would now shift lower to around 24,000. Similar levels on the BSE Sensex are at 80,650-800 points on the lower side and 82,450-750 points. This would now shift to 79,000-150 points. With FPI selling continuing, one is not sure what is it that they have in their mind about India. This remains a cause for concern as much as geo-political cues globally are.

Final point, the elections in the US are less than a fortnight away and we apparently do not have a winner as yet. It’s a close race and things could get tight. It makes sense to sit on the sidelines, await some clarity before one step into the market. Diwali Muhurat is a mere seven trading always on Friday (November 1). Keep cash for that day as opportunities would arise going forward. The pain in the mid-cap and small-cap space is far from over and this area should be avoided.

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