Things were rolling along fine for the markets until the FED meeting. Thursday, saw US markets fall as thoughts of an impending recession hit the markets overseas. Our markets too got worried and we had a sharp fall on Friday, followed by another fall in the US.
Probably, we could see the week beginning on Monday, the 5th of August, opening with a downward bias.
Markets saw yet again a series of new highs being made on the BSE Sensex and Nifty. The new intraday high on BSE Sensex was 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. The week ended with BSE Sensex losing 350.77 points or 0.43 per cent to close at 80,981.95 points while Nifty lost 116.65 points or 0.47 per cent to close at 24,717.70 points.
The broader markets saw BSE100, BSE200 and BSE500 lose 0.37 per cent, 0.17 per cent and 0.13 per cent respectively. BSE midcap lost 0.07 per cent but BSE smallcap was up 0.62 per cent.
Markets gained on the first four days of the week and lost on Friday. This incidentally also brought to an end the weekly gains which the markets achieved for the previous eight weeks in a row. Incidentally, 8 is a Fibonacci number and has great relevance in technical analysis.
The Indian rupee lost 2 paise or 0.02 per cent to close at Rs 83.75 to the US dollar. Dow Jones gained on two of the five trading sessions and lost on three.
The last two days of the week were brutal and markets lost significant ground. Dow ended the week with losses of 852.08 points or 2.10% to close at 39,737.26 points. The US FED had its policy review meeting on Wednesday. At the end of the same, it appears that at the next meeting to be held in September, there is every possibility of a rate cut, though the quantum is not yet sure. The markets did not like the fact that the rate cut did not happen as yet or the fact that the US could slip into recession going forward. Strange are the ways of the markets and we are all yet learning.
Primary markets saw a lot of action. There was one issue which opened and closed during the previous week for subscriptions, while another two have opened and will close in the coming week. Yet another two issues would open and close in the coming week.
The issue from Akums Drugs and Pharmaceuticals Limited, which had launched its IPO in a price band of Rs 646 – 679, received excellent response and was oversubscribed 63.56 times. The QIB portion was subscribed 90.09 times, the HNI portion was subscribed 42.21 times and the Retail portion was subscribed 21.3 times. There were 23.95 lakh applications in all.
The issue from Ceigall India Limited opened on Thursday, the 1st of August, and would close on Monday, the 5th of August. The issue consists of a fresh issue of Rs 684.25 crore and an offer for sale of 1,41,74,840 shares in a price band of Rs 380 – 401. At the end of day 2 of the application, the issue is subscribed 1.29 times overall. One must remember that in IPOs the largest part of the subscription comes on the third afternoon with QIB and HNI bids getting bunched at that time. The company is a road developer and had revenues of Rs 3,066.19 crore and a net profit of Rs 304.91 crore for the year ended March 24. The PE multiple for the share is 19.62 – 20.57. The share has decent prospects going forward.
The second issue is from Ola Electric Mobility Limited which opened on Friday, the 2nd of August, and would close on Tuesday, the 6th of August. The price band of the issue is Rs 72 – 76. The size of the fresh issue is Rs 5,500 crore and the offer for sale is for 80,86,26,207 equity shares. Currently, the company is loss-making as the battery is yet to be commercialised. In terms of EV sales, it is the market leader with roughly a 42-45 per cent market share. Investment with a medium-term view is warranted.
The third issue slated to open on Tuesday, the 6th of August, and close on Thursday, the 8th of August, is from the makers of Firstcry.com. The company Brainbees Solutions Limited is tapping the markets with its fresh issue for Rs 1,666 core and an offer for sale of 5,43,59,733 equity shares in a price band of Rs 440 – 465. The company is in the business of mothers-to-be, newborns and kids in the 0-12 range. A first of its kind with online and offline stores which are company-owned and operated and also franchisee-operated. Currently, the company reported negative earnings. The issue is meant for long-term investors.
The week ahead would see markets open with a negative bias. The first major support for markets would be the July lows of 24,200 on the Nifty and 79,500 on the BSE Sensex. There would be support at these levels or even earlier but the real danger is that from investors who have never seen markets fall sharply. This could lead to a cascading effect and forceful liquidation. While the markets fall, they would also throw up some good buying opportunities which could be useful to add positions.
The strategy for the week would be to allow markets to find their levels and look for buying opportunities. Trade cautiously.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)