Momentum with markets — Expect further up move

Markets continued their choppy and volatile manner during the week gone by. The end result was quite straight forward with the first three days of trading resulting in losses and the remaining two days seeing the market record gains. In reality it was not so.

On each of the three days of losses, markets had opened positive and were up for a sizeable part of the day before selling brought the markets down and turned negative.

On Thursday, markets were weak and recovered form the lows to record gains. BSE-SENSEX gained 558.27 points or 1.03 per cent to close at 54,884.66 points while NIFTY gained 86.30 points or 0.53 per cent to close at 16,352.45 points.

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The broader indices saw BSE100 and BSE200 gain 0.30 per cent and 0.17 per cent respectively while BSE500 lost 0.11 per cent.

Similarly, while BSE MIDCAP gained 0.05 per cent, BSESMALLCAP lost a massive 2.77 per cent. For the records, the low on BSE SENSEX was 53,425 points while it was 15,903.70 points on NIFTY.

The Indian Rupee was volatile and closed virtually unchanged losing 1 paisa or 0.01 per cent to close at Rs 77.56 to the US Dollar. Dow Jones had a stellar week and gained on all five days of the week. Dow Jones gained 1,951.06 points or 6.24 per cent to close at 33,212.96 points.

May expiry saw the series lose 892.60 points or 5.18 per cent to close at 16,352.45 points. The series was volatile and saw markets move in both directions. The high of the series was on the opening day April 29 of 17,377 points while the low was 15,735 points. The low has been tested twice and would be a point of support in the immediate short term.

Primary markets were active with there being three listings and two issues closing for subscription.

The first share to list was from Delhivery Limited which had issued shares at Rs 487. Shares closed on listing day at Rs 537.25, a gain of Rs 50.25 or 10.31 per cent. Shares gained some ground to close the week at Rs 541, a gain of Rs 54 or 11.09 per cent.

The second share to list was from Venus Pipes and Tubes Limited which had issued shares at Rs 326. Shares closed day one at Rs 351.75, a gain of Rs 25.75 or 7.89 per cent. The share lost some ground during the week and closed at Rs 334.40, a gain of Rs 8.40 or 2.58 per cent.

The third share to list was from Paradeep Phosphates Limited which had issued shares at Rs 42. Shares closed day one at Rs 43.95, a gain of Rs 1.95 or 4.64 per cent.

Two issues closed their subscription during the week. The first was eMudhra Limited and was open from Friday the May 20 till Tuesday, May 24. The price band was Rs 243-256. The issue was subscribed 2.74 times overall with QIB portion subscribed 3.93 times, HNI portion subscribed 1.31 times and Retail portion subscribed 2.67 times. There were 2,18,894 application forms.

The second issue was from Aether Industries Limited which had opened for subscription on Tuesday (May 24) and closed on Thursday (May 26). The price band was Rs 610-642. The issue was subscribed 6.62 times overall with QIB portion subscribed 19.36 times, HNI portion 2.63 times, Retail portion 1.19 times and Employee portion subscribed 1.12 times. There were 1.85 lakh applications.

The week ahead has three listings with Ethos Limited listing on Monday, eMudhra Limited listing on Wednesday and Aether Industries Limited listing on Friday. No fresh issues are slated thereafter.

There is a new type of incident happening in IPOs prominently since the beginning of April 22. A large number of applications are being rejected in every issue as they are not being banked after being bid.

This is on account of investors not giving confirmation to the UPI message which is sent to them for applications bid through syndicate brokers. Rejection of 1-2 lakh applications has become the norm. In LIC the number was 12 lakhs out of 73 lakh applications. In Prudent Corporate Advisory it was 1.10 lakh applications from 1.53 lakh applications.

In Delhivery, it was 1 lakh forms from 1.73 lakhs and in the case of Venus it was 1.92 lakh applications out of 6.28 lakh applications. In the case of Paradeep Phosphates, about 1.75 lakh applications were not banked against 4.11 lakh applications.

Ethos was a serious example by itself. The issue was for a fresh issue of Rs 375 crore and an offer for sale of Rs 100 crore.

The issue was subscribed 1.10 times and had received 88,476 application forms. Post the closure, this number was reduced to 20,238. The fall at 77.12 per cent is serious and indicates that all is certainly not well in the system.

The issue complied with regulations for subscription with the two merchant bankers to the issue contributing Rs 14 crore each approximately to the issue and completing the process. This is a serious issue and hope the regulator with merchant bankers find solutions before some issue goes down under. The area where things seem to be going out of control is applications which are bid at syndicate member terminals.

The week ahead begins with a holiday in the US on Monday on account of Memorial Day. This will allow markets in India to resume their upward momentum of the last two days and build on it. Expect markets to correct post the strong momentum. Key resistances would be around the 16500-16,600 levels. If these are crossed, the next resistance would be 16,850-16925 levels on NSENIFTY. These would correspond to levels of 55,700-56,000 points on BSESENSEX. The next level for resistance would be 56,500-56,800 points. Whether these levels particularly the second are reached during the week look doubtful but are mentioned as key extremes.

As far as immediate support is concerned, lows of the previous week at 53,400 and 15,900 levels will act as strong support.

The strategy for the week would be to play for the expected bounce when the week begins. Expect some correction thereafter and momentum to again pickup after the correction. Sell on strong rallies and buy on dips. It continues to be a trader’s market.

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

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