The ground slips away

Union Finance Minister Arun Jaitley (left) makes a point, with Revenue Secretary Hasmukh Adhia addressing the media after the GST Council in New Delhi. Pic/PTI

Volatility increased substantially and we saw markets lose significant ground. The BSESENSEX lost 802.26 points or 2.80 per cent to close at 27,865.96 points. while NIFTY lost 220.40 points or 2.50 per cent to close at 8,611.15 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 2.36 per cent, 2.13 per cent and 2.07 per cent respectively. BSEMIDCAP lost 1.24 per cent and BSESMALLCAP lost 1.37 per cent losing less than the benchmark indices. There were no sectoral gainers, but the one to lose the least was BSEIT down 0.68 per cent. The losers were led by BSECAP GOOD down 3.55 per cent. Other losers included BSEREALTY 3.73 per cent, BSEFMCG 3.26 per cent and BSEBANKEX 3.11 per cent.

In individual stocks, the gainers were led by Cairn India up 1.70 per cent. Other gainers included TCS 1.25 per cent and Vedanta 1.21 per cent. The losers were led by BHEL down 7.90 per cent followed by ICICI Bank 7.17 per cent, Cipla 5.06 per cent, ITC 4.85 per cent, Hind Unilever 4.62 per cent and Larsen & Toubro 4.34 per cent. Last week, one has noticed that a large number of heavyweight stocks have lost around 5 per cent each bringing the benchmark indices down. Also, the current level of the SENSEX and NIFTY was last seen in July 2016.

Weakness seen
The Indian Rupee gained 4 paisa or 0.06 per cent to close at Rs 66.65. Dow Jones gained 46.70 points or 0.26 per cent to close at 18,308.15 points. NIFTY September series expired at 8,591.25 points which was a mere 0.95 points lower than the previous expiry. This was after the series was up almost 240 points before the last week began. The markets were due for a correction, but they found a reason when the army announced surgical strikes on terror launch pads. Thursday saw a loss of 465 points on the SENSEX, but the weekly loss was 802 points. This means that weakness had set in earlier itself. Starting the week of October 10, quarterly results for July to September would begin. One is not expecting too much from them, but, some positives are likely.

On issues
The primary markets saw two listings during the week. The first was GNA Axles which had through a fresh issue of 63 lakh at Rs 207 raised Rs 130 crore. The issue was subscribed 55 times. Shares began trading in the trade to trade segment from Monday and closed at Rs 227.05, a gain of Rs 20.05 or 10.05 per cent. On listing day shares had touched a high of Rs 260. The beginning is good and one would like to see the results for the July-Sept quarter before forming further opinion on the stock. The other issue to list was the mega Rs 6,000 crore issue from ICICI Prudential Life Insurance Company Limited. The company had through an offer for sale, raised the above amount at Rs 334. The share had a decent start but was unable to trade at any premium. There was selling pressure and some amount of panic in the afternoon, which saw the share make a low of Rs 295.50 on listing day. The share recovered on Friday and closed at Rs 310.10, a weekly loss of Rs 23.9 or 7.16 per cent.

Wise company
Continuing with the primary market, Endurance Technologies Limited, which is an auto ancillary taps the market with its offer for sale of 2.46 crore shares in a price band of Rs 467-472. The company would be raising Rs 1,161 crore. The issue opens on Wednesday, October 5 and closes on Friday, October 7. The company is into four broad verticals of aluminum casting and machining, suspension, transmission and braking systems. The company has 25 plants in India and Europe. In India it supplies to two, three and four wheelers, while in Europe it supplies to only four wheelers. Roughly 70 per cent of its revenues come from India, while the balance comes from Europe. It reported a top line on a consolidated basis of Rs 5,274 crore and a net margin of 5.5 per cent. The net profit was Rs 292 crore. The shares are being offered at a price earnings multiple of 22.80 times on a consolidated basis, based on March 2016 annual results.

Caution, please
Markets are tired and have lost momentum. There is likely to be a small rally based on the positive feedback in relation to the success of the income declaration scheme which has received disclosures of over Rs 65,000 crore. Also even though bidding after five rounds in the spectrum auction was muted, Rs 55,000 crore has been cumulatively bid for. The government's deficit would be largely taken care of. With markets behaving the way they are, it makes sense to use any rallies to book profits and wait for corrections. Trade cautiously.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in

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