19 June,2017 06:49 AM IST | Mumbai | Arun Kejriwal
Markets were under pressure in the week gone by and lost ground. This does not suggest that the best is over. Markets would continue to struggle but clearly that they need to consolidate, gather momentum before moving on
Union Minister for Finance and Corporate Affairs Arun Jaitley with MoS Santosh Gangwar, Revenue Secretary Hasmukh Adhia and Puducherry Chief Minister, V Narayanasamy at the GST Council Meeting in New Delhi yesterday. Pic/PTI
Markets were under pressure in the week gone by and lost ground. This does not suggest that the best is over. Markets would continue to struggle but clearly that they need to consolidate, gather momentum before moving on. The BSESENSEX lost 205.66 points or 0.66 per cent to close at 31,056.40 points, while NIFTY lost 80.20 points or 0.83 per cent to close at 9,588.05 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 0.70 per cent, 0.64 per cent and 0.50 per cent respectively. BSEMIDCAP lost 0.46 per cent but BSESMALLCAP gained 0.76 per cent.
On top and not
The top sectoral gainer was BSEREALTY up 4.47 per cent followed by BSEPOWER at 0.84 per cent. The top loser was BSEMETAL down 2.42 per cent followed by BSEIT 2.15 per cent and BSETECH 2.03 per cent. In individual stocks the top gainer was DLF up 4.69 per cent followed by Reliance Industries 3.92 per cent and Dr Reddy's 1.77 per cent. The top loser in stocks was Wipro down 5.00 per cent followed by TCS 4.49 per cent and Vedanta 3.33 per cent.
Dow Jones gained 112.31 points or 0.53 per cent to close at 21,384.28 points. Looking out for the Indian rupee? It lost 19 paisa or 0.30 per cent, to close at Rs 64.43.
Shift in action
Action has shifted completely to the primary market. We had Tejas Networks closing on Friday and in the coming week three more issues would close. The first is Eris Life Sciences Limited which has opened on Friday, June 16 and closes on Tuesday, June 20. The price band for the offer for sale is R 600-603. The company manufactures drugs and is located in Guwahati, Assam. It gets tax breaks. The capacity utilised is under 50 per cent.
For the last five years, the company has been reporting profits. Yet, it has come under a dispensation under which the retail share is cut from 35 per cent to 10 per cent, when this is meant for companies with an inadequate profit record. How does Eris qualify? Is this a new way to restrict allocation to retail shareholders? Or a way to benefit QIB allocation allotment which is on a discretionary basis. Thirdly, the valuation of the offer for sale is at around 34 times which is more than MNCs like Abbott India, Pfizer and Sanofi. When in doubt, avoid it should be your mantra.
The second issue is from CDSL or Central Depository Services (India) Limited. A straight forward business with decent valuations, which are below the BSESENSEX and NIFTY of around 18-19 times. The offer for sale is in a price band of Rs 145-149. The issue will open today, June 19 and close on Wednesday, June 21. The issue would be oversubscribed many times in the retail category, as the valuations are decent and every investor is aware of the depository as he deals with them each time he transacts in the stock market.
The third eye
The third issue is from GTPL Hathway Limited which is a MSO offering cable and broadband services in Gujarat. The issue opens on Wednesday, June 21 and closes on Friday, June 23. The issue is in the price band of Rs 167-170 which values the shares at a PE multiple of 58 times based on annualised nine months December 2016 earnings. The company has compared itself with Hathway Cable, Den Networks and Siti Cables which are loss making companies and Ortel Communications which trades at a PE multiple of 19.95 times. Companies in this business have not made money for their public shareholders, as is apparent. Why re-invent the wheel and try your luck and get caught? Just stay away.
There was an issue which had opened and closed last week from Tejas Networks Limited. The issue just about managed to get subscribed with overall subscription 1.88 times. The QIB portion was subscribed 2.16 times while HNI remained undersubscribed at 0.48 times and retail 3.10 times.
Time to consolidate
This brings us back to the issue of CDSL which seems fairly priced and would fare the best of the lot in the subscription stage.
Coming back to the secondary markets, last week was tough going and markets were found wanting. The markets would need to consolidate and regain strength, before any talk of new highs can happen. Allow markets to consolidate as that is the need of the hour. Use any sharp moves in either direction to trade the market.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only.
