Mkts turn sluggish amid IPOs

The domestic markets in the November 15- 22 period were choppy and volatile. The markets gained on two of the five trading sessions and had a roller coaster ride on the 5th day moving between positive and negative and back to positive. Markets finally ended on a positive note. BSE Sensex gained 347.31 points or 0.53 per cent to close at 66,023.24 points, while Nifty gained 136.40 points or 0.69 per cent to close at 19,811.85 points. The out performance by the mid-cap and small-cap space continues. Results season has finished and overall, it was a mixed bag for the performance of companies.

Dow Jones gained on two of the five trading sessions, lost on two and was flat on one. It was up 260.59 points or 0.75% to close at 35,088.29 points. Markets seem to have factored in that there may not be any more rate hikes in the remaining 35 days of the calendar year 2023.

RBI hiked the risk weightage on consumer credit. This will have an impact on the cost of funds in the short-term and affect the general cost of borrowing for the entire banking industry in the medium term. While the measure is welcome as questions were raised about consumer credit and impact on some of them turning delinquent. This move will impact banking industry performance in the short to medium term. Bank Nifty was one sore point in the rally last week. This also explains in part why FedBank Financial Services Limited IPO is not as well received as the other four issues.

The market seems to be having a flurry of IPOs this week. There are five issues which are currently open with one issue from IREDA closing on Thursday and the remaining four closing on Friday. They would also list in the early part of new week with IREDA listing on Tuesday and the remaining four listing on Wednesday. Monday is a bank holiday.

The five issues which are open currently include Indian Renewable Energy Development Agency Limited, Tata Technologies Limited, Flair Writing Industries Limited, Gandhar Oil Refinery (India) Limited and Fedbank Financial Services Limited. These issues cumulatively would raise Rs7,400 crore. How many times they do get subscribed is anybody’s guess.

The November 23-29 period ahead would have a trading holiday on Monday and five listings. One of these would list on Tuesday and the remaining four would list on Wednesday. Wednesday would be a crucial day as living memory doesn’t recall four main board listings on a single day in a very long time.

The current mood and sentiment in the market is one of range bound movement and markets trying to consolidate. With the two heavyweights in the benchmark indices, HDFC Bank and Reliance Industries refusing to budge, markets have become sort of status quo with little or none movement on a net basis. Further IT is a laggard and Bank Nifty or BFSI space with a 40 per cent plus weightage including HDFC Bank getting affected post RBI circular, there is no way that benchmark indices can have any meaningful gains in a jiffy. The markets need to break out of the present movement and cross and close above 19,900 points on Nifty and corresponding to 66,600 points on BSE Sensex. Suffice to say that this is the bare minimum for them to then move up sharply and attempt to also make a new lifetime high.

When is the next question? The best opportunity for the markets would be after this expiry and the results of the five states going to elections announcing their results on December 3. There would be knee jerk reactions to the results depending on the outcome, but they would weather them off. Further the talk about a ceasefire and exchange of hostages in the Israel Hamas war is also being discussed. These events could happen around the same time.

The strategy would be to allow markets to find their own levels over the next six to eight trading sessions. If after that the markets have the strength to break out then there would be a meaningful rally. Till then bide your time and make some money from the five issues in the primary market currently open.