Will markets continue to rally

New Delhi : Markets continued their volatile movements and before trading commenced on Friday, the last day of the week, they were marginally negative on a weekly basis. Positive GDP numbers combined with the start of the new month futures of September, saw markets gain big time on Friday with BSE SENSEX rising 555 points and NIFTY up 181 points.

This changed the sentiment and a week which looked as ending with minor losses turned into a week with gains. BSESENSEX gained 500.65 points or 0.77 per cent to close at 65,387.16 points while NIFTY gained 169.50 points or 0.88 per cent to close at 19,435.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.05 per cent, 1.14 per cent and 1.46 per cent respectively.

BSEMIDCAP gained 2.34 per cent while BSESMALLCAP was up a staggering 3.78 per cent. Markets gained on three of the five trading sessions and lost on one session while they were flat on the 5th session. The only day of loss was on Thursday when August futures expired.

The Indian Rupee lost 7 paisa or 0.08 per cent to close at Rs 82.72 to the US Dollar. Dow Jones gained on four of the five trading sessions. It gained 490.81 points or 1.43 per cent to close at 34,837.71 points.

August futures expired on a weak note. The series lost 406.10 points or 2.07 per cent to close at 19,253.80 points.

Activity in the primary market continues with a bang. There were two listings during the week and one issue which opened and closed for subscription. There was another issue which had opened for subscription during the previous week, and closed this week.

The first issue to list was Pyramid Technoplast Limited. The company had issued shares at Rs 166 and debuted at Rs 185. The share closed at lower circuit on that day at Rs 175.75, a gain of Rs 9.75 or 5.87 per cent . By the end of the week, the share had turned negative and closed at Rs 161.60, a loss of Rs 4.40 or 2.65 per cent .

The second share to list was Aeroflex Industries Limited which had issued shares at Rs 108. The share listed on Thursday (August 31) at Rs 197.40 which was the high as well. The share lost ground to 165.25, a gain of Rs 57.25 or 53 per cent.

The issue from Vishna Prakash R Punglia Limited had opened on Thursday (August 24) and closed on Monday (August 28). The issue which would be priced at Rs 99 per share was subscribed 87.80 times. The QIB portion was subscribed 171.69 times, HNI portion was subscribed 111.02 times and Retail portion was subscribed 31.99 times. There were 20.81 lakh applications.

The issue from Rishab Instruments Limited was open from Wednesday the 30th of August to Friday (September 1). The issue was subscribed 31.65 times overall with the QIB portion subscribed 72.54 times. HNI portion subscribed 31.29 times and Retail portion subscribed 8.43 times. There were 8.65 lakh application Ihe issue.

The week ahead sees the issue from Jupiter Hospital Limited tap the capital markets. The issue consists of a fresh issue of Rs 542 crore and an offer for sale of 44.50 lakh shares in a price band of Rs 695-735. The company currently runs three hospitals in Thane, Pune and Indore which have 1,195 beds in total. The company proposes to set up a new 500 bed hospital in Dombivli in the coming two years.

The EPS of the company on a fully diluted basis is Rs 12.95 and the PE band of the issue is 53.67-56.76. Prima facie the PE multiple looks expensive but looking at the way that euphoria seems to have engulfed capital markets and particularly primary markets, this issue too would be a runaway success. Investment could be made for listing gains and then looked at post listing for a medium-term investment duration.

Movement in the markets seems to have taken a different direction. The large cap stocks are not performing too well and the two heavyweight stocks in the benchmark indices, Reliance and HDFC Bank seem to have taken a backseat in the market. This is keeping the markets under check while stocks that have not been performing have become out fliers.

Further while the markets continue to gain, the number of stocks gaining are not the regulars and seem to be far fewer in number than the gains in the indices. This indicates that stocks which are not public fancy seem to be moving and they are from the small and midcap space. This is time to become cautious and be careful what one picks up.

The strategy for the week ahead would be to expect Reliance and HDFC Bank to participate in the rally sooner than later, if markets have to make a serious effort to challenge Mount 20K. In case they do not take part, then expect markets to give way. Crucial support continues at the 19,200 level on NIFTY and 64,700 levels on BSESENSEX. The resistance is again in the region of 19,600-19,650 and 65,900-66,000 levels. Trade cautiously where one could see distribution of stocks in the midcap and Smallcap stocks at higher levels happening in a big way.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)