Home Markets Mid-week holiday to lead to sharp volatility

Mid-week holiday to lead to sharp volatility

by Arun Kejriwal (Market veteran investor and Opinion Maker)
Jul 19, 2021
Mid-week holiday to lead to sharp volatility, Market, KonexioNetwork.com

Markets had a decent outing in the week gone by and they gained on three of the five trading days. The remaining two trading days were flat with virtually insignificant movement. BSESENSEX gained 753.87 points or 1.44% to close at 53,140.06 points while NIFTY gained 233.60 points or 1.49% to close at 15,923.40 points. The broader indices like the BSE100, BSE200 and BSE500 saw gains of 1.35%, 1.41% and 1.51% respectively. BSEMIDCAP gained 1.39% while BSESMALLCAP was up 2.27%. The benchmark indices made new lifetime intraday highs of 53,290.81 points and 15,962.25 points on Friday while closing highs were made on Thursday at 53,158.85 points and 15,962.25 points respectively. Clearly market momentum has picked up while the only thing missing is euphoria in the secondary market.

The Indian Rupee gained 18 paisa or 0.24% to close at Rs 74.56 to the US Dollar. Dow Jones had a poor show on Friday when it lost about 300 points and hence ended down for the week with a loss of 182.31 points or 0.52% to close at 34,687.85 points. 

In primary market news, the IPO from Zomato Limited for Rs 9,000 crs fresh issue and offer for sale of Rs 375 crs received excellent and euphoric support. The total amount garnered was Rs 2.14 lac crs including the anchor portion of about Rs 4,196 crs. The QIB portion was subscribed 54.71 times, HNI portion was subscribed 34.80 times, Retail portion was subscribed 7.87 times and Employee portion remained undersubscribed at 0.62 times. The anchor portion saw 100 anchor investors comprising of 186 entities. What is strange in the anchor allocation is an allotment of 2.90 lac shares allotted to ICICI Prudential Dividend Yield Fund. Is it not strange that a company which has accumulated losses, has never made profits since inception and not sure how many more years before it makes profit, sees investment by a dividend yield fund? Another way of looking at it is with 186 entities roped in, is anybody left out. 

There were unconfirmed reports about the anchor portion being subscribed or receiving bids of 35-37 times the anchor size. While the official number would be publicly available on the day of allotment, what does this effectively mean? The oversubscription would have garnered response of 1.47-1.55 lac crs. The total response from the QIB book was 1.53 lac crs. The maths just does not add up. Does it mean that only those people who had applied for anchor allotment have applied? 

There is an issue from Tatva Chintan Pharma Chem Limited which is tapping the capital markets with its fresh issue for Rs 225 crs and an offer for sale of Rs 275 crs in a price band is Rs 1,073-1,083. The issue has opened on Friday the 16th of July and closes on Tuesday the 20th of July. The company is a niche speciality chemical company manufacturing SDA (structure directing agents), PTC (Phase transfer catalysts), PASC (pharmaceuticals and agrochemicals intermediates) and Electrolyte salts for SCB. The company is the largest manufacturer in its category in the country and one of the leading players in the world as well. The revenues of the company were Rs 300.36 crs for the year ended March 2021 and Net Profit after tax was Rs 52.40 crs. The company enjoys healthy margins of 23% at the EBITDA level and 17% at the PAT level. The company reported an EPS of Rs 26.02 for the year ended March 2021. The PE band is 41.24-41.62 times based on March 2021 numbers. The issue which opened on Friday has been subscribed 4.55 times on day one with Retail portion being subscribed 8.32 times. There is money on the table for those investors who are lucky to get an allotment.

The primary issues from G R Infraprojects Limited and Clean Science Technology Limited would both be listing their shares on Monday the 19th of July. These issues were entirely offer for sale and had received excellent response. 

After the runaway success of Zomato Limited in the primary market, Paytm has filed its DRHP for a Rs 16,600 cr IPO which consists of an equal size of fresh issue and offer for sale. 

On the covid-19 front, the world saw 19,12,17,048 patients, 41,05,728 deaths and 17,41,65,937 patients who had recovered. In India we saw, 3,11,43,595 patients, 4,14,141 deaths and 3,03,00,762 patients who had recovered. In the previous week, the world saw 35,84,292 new patients, 56,657 deaths and 25,81,719 patients who had recovered. In India, we saw 2,69,688 new patients, 5,349 deaths and 2,93,562 patients who had recovered. The number of people who have been vaccinated has crossed the 40 cr mark. 

The week ahead has a trading holiday midweek on Wednesday. This effectively means two trading periods of two days each. This would disrupt the momentum and make Tuesday a day when we could see positions being lightened ahead of the holiday. Similarly, Thursday could be a highly volatile day, where markets react to happenings of Tuesday evening in US and global markets on Wednesday. The previous week saw new highs being achieved and markets hitting the top end of the band as was envisaged. In normal circumstances, one would have expected a breakout to happen in the coming week but the same may get delayed because of the trading holiday. 

It makes logical sense to play the ensuing volatility and continue booking profits on sharp rallies and buying into corrections as the previous week. Markets will see volatility and different pack of stocks moving each day and making new highs. If I had to stick my neck out and hazard a guess, the week beginning 26th July and also having July futures expiry would be the frenzy week in the markets. The best that could happen this week is that the early signs of impending movement are visible when trading ends on Friday the 23rd of July. Trade cautiously.