While markets are looking vulnerable, with poor volumes the volatility is likely to increase
While markets are looking vulnerable, with poor volumes the volatility is likely to increase
Last week ended on a recovery mode with the indices gaining on Friday. This was the second consecutive week where the Friday rally had actually saved the indices. Last Friday, the BSE Sensex gained 185 points while the NSE Nifty gained 58 points. The week before that was also similar with the Sensex gaining 196 points and the Nifty an identical 58 points. Previous week closed with losses of 205.19 points or 1.11 per cent while the Nifty lost 58.4 points or 1.05 per cent to close at 5486.35 points. The broader indices like the BSE100, BSE200 and BSE500 lost more with losses of 1.28 per cent, 1.43 per cent and 1.45 per cent respectively. The BSE Midcap and BSE Smallcap lost double of the Sensex losing 2.12 per cent and 2.19 per cent.
Pic/AFP
Weak
The realty sector continued its weakness and in individual stocks 2G scam affected counters like DB Realty and Unitechm which lost 6.35 per cent and 7.62 per cent. State Bank of India was a big loser on poor fourth quarter results and lost Rs 327 or 12.34 per cent to close at Rs 2,322.
Response
Coming to the IPO front the last of the issue from the present lot, Galaxy Surfactants limited failed to get adequate response from investors because of higher prices and decided to withdraw its IPO. Vaswani Industries, saw some investors from Gujarat making complaints about the basis of allotment to Securities and Exchange Board of India (SEBI) and saw the listing being stalled. This issue throws up some interesting thoughts on how small cap and midcap IPOs are subscribed. There is an active grey market active in such shares and an informal buyback is also in place. Issues, which receive zero or are undersubscribed by Qualified Institutional Bidders(QIBs) see huge subscription from HNIs (High Networth Individuals) and retail investors.
The people who invest in such issues sell on day one. In the past one finds that between 65-85 per cent of the IPO size changes hands on day of listing. Vaswani Industries was no exception and saw subscription from retail and HNIs. There was some withdrawals and the allotment per applicant increased which is reason for discomfort.
Subscription
I believe that SEBI should look at the bigger picture of these smaller IPOs and the modus operandi of getting them subscribed. A closer look at the list of applicants in the last 10 IPOs will find that the list of applicants is common and they all consist of "Flippers", people who sell the allotted shares on day one. The withdrawal of shares has happened in a legal manner and therefore the allotted shares increased. The question asked to these complainants is what made them apply for this company in the first place? There are no issues opening this week and of the ones which have listed in the last one-month, every single one has lost ground last week and all of them are trading in the negative with losses ranging from 10 per cent to 55 per cent. Shares of Power Finance Corporation follow on offer will be allotted this week and we should see trading action in this counter from today. Retail investors will be allotted shares at Rs 192.85 and this includes a 5 per cent discount to retail investors.
Concern
Coming to the markets, trading volumes are substantially down and there seems to be a lack of interest in the market. Foreign Institutional Investors(FIIs) continue to be sellers in the market and overseas cues also are not too positive. Diesel, kerosene and LPG prices have not yet been raised and this is a cause of concern.
Future
In the week beginning Monday, May 23, there appears to be a certain amount of negative bias in the marketplace. The BSE Sensex has support at 18,181 points, then at 18,067 points, then at 17,913 points, then at 17,792 points and finally at 17,595 points. It has resistance at 18,449 points, then at 18,538 points, then at 18,718 points, then at 18,976 points and finally at 19,010 points. The Nifty has support at 5,440 points, then at 5,411 points, then at 5,355 points and 5,270 points. It has resistance at 5,525 points, then at 5,551 points, then at 5,609 points and finally at 5,692 points. The markets are looking vulnerable and with poor volumes the volatility is likely to increase. Trade very 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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