IANS | 12 Feb, 2024
It was an extremely volatile week in which one saw intraday gains
being wiped out as well as opening losses being more than recovered.
At the end of it all, markets gained on two of the five trading
sessions and lost on three. BSESENSEX was down 490.14 points or 0.68 per
cent to close at 71,595.49 points; NIFTY lost 71.30 points or 0.33 per
cent to close at 21,782.50 points. The broader markets saw BSE100,
BSE200 and BSE500 gain 0.22 per cent, 0.34 per cent and 0.22 per cent
respectively. BSEMIDCAP was up 1.65 per cent but BSESMALLCAP was down
0.44 per cent.
Intraday volatility and intraweek volatility has
increased substantially in the midcap and Smallcap space and the net
index changes at the end of the week do not give a fair picture of the
volatility.
The Indian Rupee lost 12 paise or 0.14 per cent to
close at Rs 83.04 to the US Dollar. Dow Jones gained on three of the
five trading sessions and lost on two sessions. At the end of the week,
Dow was up a mere 17.27 points or 0.04 per cent to close at 38,671.69
points.
At the end of the three-day bi-monthly meeting of the
monetary policy committee meeting, RBI kept repo rates unchanged at 6.5
per cent. These rates have not been changed since February 2023.
Markets
have become very volatile and are giving some signs of a reasonably
large correction happening in the coming period. For the records, the
high on the BSESENSEX was made on 16th January at 73,427.59 points and
on NIFTY at 22,124.15 points on the same day. In a flash of a pan
movement, NIFTY crossed this high by a whisker at 22,126.80 points on
February 2.
What to make of this is debatable as BSESENSEX made a
substantially lower high as compared to January 16 of 73,089.40 points.
Looking at the fact that with just the last week left for results of the
October-December 2023 quarter to be declared, the general summary
indicates that the growth in revenue being talked about seems missing.
There
have been some outstanding results, but the pace of growth in revenues
and profits is clearly missing. For the new trend to emerge we will now
have to wait for yet another quarter at the bare minimum. This would
also coincide with the general elections which would be held in
April-May 2024.
In primary market news we had four issues which
closed for subscription during the week. The first was Apeejay Surrendra
Park Hotels Limited which had tapped the markets with its fresh issue
of Rs 600 crore and an offer for sale of Rs 320 crore. The price band
was Rs 147-155.
The issue was subscribed 62.90 times overall with
the QIB portion subscribed 79.23 times, HNI portion subscribed 55.25
times and Retail portion subscribed 31.96 times there were 18.95 lac
applications.
The second issue was from Rashi Peripherals Limited
which had tapped the markets with its fresh issue of Rs 600 crore in a
price band of Rs 295-311.The issue was subscribed 62.95 times overall
with QIB portion subscribed 151.45 times, HNI portion subscribed 66.15
times and Retail portion subscribed 11 times. There were 15.07 lac
applications.
The third issue was from Jana Small Finance Bank
Limited which had tapped the capital markets with its fresh issue of Rs
462 crs and an offer for sale of 26,08,629 equity shares. The price band
of the issue was Rs 393-414. The issue was subscribed 18.43 times
overall with QIB portion subscribed 38.75 times, HNI portion subscribed
25.05 times and Retail portion subscribed 5.46 times. There were 7.04
lac application forms in all.
The fourth issue was from Capital
Small Finance Bank Limited. The company intended raising Rs 450 crore in
a fresh issue and an offer for sale of 15,61,329 shares in a price band
of Rs 445-468. The issue was subscribed 4.17 times overall with QIB
portion subscribed 6.86 times, HNI portion subscribed 4.23 times and
Retail subscribed 2.60 times. There were 4.17 lac applications in all.
The
subscription comparison between Jana Small Finance Bank and Capital
Small Finance Bank Limited was stark. Both the issues were of similar
size, a fairly similar price band and coincidentally in the same
business, small finance bank.
The valuation and direct comparison
resulted in one being well-received and doing well and the other just
getting subscribed at a time when markets are overflowing with funds,
big learning for merchant bankers and prospective promoters looking to
tap the markets going forward.
There is one issue in the coming
week which has already opened on Friday, February 9, and closes on
Tuesday, February 13. The issue from Entero Healthcare Solutions Limited
is tapping the capital markets with its fresh issue of Rs 1,000 crore
and an offer for sale of 47,69,475 shares in a price band of Rs 1,195 to
1,248. The company is into the business of distributing healthcare
products in India.
Entero Healthcare Solutions is the third
largest in terms of revenues in this space. It distributes
pharmaceuticals and also has a range of white label products in
healthcare devices and related products which currently form a small
part of its overall revenues.
The company has been growing its
presence in the country by acquiring small well-established distributors
across geographies and then converting them into subsidiaries. The idea
is to have a well-knit all India presence which uses technology to
achieve last mile distribution of these products.
The company
achieved revenues of Rs 3,300 crore for the year ended March 2023 and
reported a net loss of Rs 11.10 crore for the same period. Revenues for
the half year ended September 23 have improved to Rs 1,895 crore and the
company has turned profitable for the first time and earned a profit of
Rs 11.64 crore.
In terms of EPS, as the company has reported
losses for the year ended March 31, 2023 and therefore the EPS is
negative Rs 3.10. The same is positive for the first six months at Rs
2.95.
The only comparable player in the listed space which has a
similar business model in part is Medplus. The other comparable price
matrix for companies is price to book. The NAV of the company post
conversion of CCCP as at September 23 is Rs 185.84.
This
effectively means that the company is asking for a price to book of 6.71
times. The business is complex, needs time to stabilise and achieve a
decent profitability. Readers could look at the share post listing.
Coming
to the markets in the week ahead, volatility would be the order of the
day. On the upside levels of 73,427 on BSESENSEX and 22,126 on NIFTY
would be Mount Everest. I believe these need a superhuman effort with
massive index management and accompanied by very strong news flow to be
taken out. Suffice to say that without consolidation, this is something
which cannot happen.
On the support side, levels of 21,500 and
70,750 would act as decent levels where markets would look to bounce. If
these are broken, then levels of 21,200 and 69,850 would act as solid
supports for the time being. Depending on how markets behave, future
movement in key indices would be decided.
A note of caution would
be that there could be a reason for a sharp fall in the markets over a
couple of days. This could happen in this week or the next. The trading
strategy would continue to book profits on rallies and reduce exposure
in the midcap and Smallcap space. Safety lies in the large cap space
where buying should be done only on sharp dips.