Over the past week, markets have seen wild swings, with the first three days seeing a sharp drop followed by a more than equally strong rise, then another drop, to return to neutral ground. Friday was a zero day and the markets ended slightly higher. The week ended with a slight negative bias and in what could be called a very volatile week.
BSESENSEX lost 30.54 points or 0.05% to close at 58,803.33 points while NIFTY lost 19.45 points or 0.11% to close at 17,539.45 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.20%, 0.29% and 0.38% respectively. BSEMIDCAP gained 1.37% while BSESMALLCAP rose 1.35%.
The Indian rupee gained 6 paisa or 0.08% to close at Rs 79.80 per US dollar. Dow Jones continued to remain under pressure and lost four of five trading sessions. It lost 964.96 points or 2.99% to close at 31,318.44 points. It is now down 13.81% since the start of the year. On a similar comparison, Indian benchmarks are up about one percent.
India is now the fifth largest economy in the world. It ousted the UK. GST collections for the month of August were 1,43,612 crore. It is the sixth month in a row that the collection is at Rs 1.40 lakh crore or more.
The primary market sees the issuance of Tamilnad Mercantile Bank Limited tapping the markets with its new issuance of 1,58,40,000 shares in a price range of Rs 500-525. The question would raise Rs 792- 831.6 crore at the price range. The issue opens Monday, September 5 and ends Wednesday, September 7. On Friday, the company completed the allocation to anchor investors of 71,28,000 shares at Rs 510. Over the past two years, the anchor book or allocation is not recalled to have been made at a lower price at the higher end.
As far as the performance of the bank is concerned, it is a dominant century-old private bank in the state of Tamil Nadu. In terms of activity, no less than 75% comes from the state of Tamil Nadu. The next segment of activity comes from the states of Maharashtra, Andhra Pradesh, Karnataka and Gujarat, which contribute about 16%.
The bank has experienced very significant growth during the Covid-19 pandemic. Its EPS doubled from 2019-20 to 2021-22 from Rs 28.61 to Rs 42.34 and finally to Rs 57.67. It also has decent asset quality. Its gross NPAs were 1.69% while net NPAs were 0.95% for the year ending March 2022.
The shares which are offered at a price range of Rs 500-525 have a PE multiple of 8.67-9.10 times its FY22 earnings. In terms of book value, the same is at Rs 374, 41, making the show at 1.4 times the price to book.
Looking at the anchor allocation, it becomes clear that indeed the new price range is now 500-510 rupees and the shares would be allocated at 510 rupees. Readers may ask for the bank’s stock given its fundamentals and pedigree, given that it is a 100-year-old bank. The upside may be limited and investors should only apply for the medium term. Considering its peer group, the bank is correctly valued.
A change has been introduced to the bidding process for IPOs with effect from 1 September. Offers made are expected to be locked in by the end of the day before final subscription figures are announced. This is in relation to the hustle and bustle that has arisen where thousands of applications have been seen not being banked after being tendered. It was also noticed that issues subscribed at the end of the auction period were actually undersubscribed after the final figures. This would end the bidding of investors who wanted to eat the cake and have it.
As for the markets in the coming week, we would see volatility continuing. While REITs were buyers most of the time in August, September was not the case and they were also sellers. The situation is not the best on the American markets and the rise of 75 basis points during the meeting of September 20 and 21 is inevitable. How the markets react and how they react would depend on the commentary released after the outcome of the meeting.
Our markets would find strong resistance at the 17,750-800 and 59,450-59,550 levels. In case they manage to break these levels for some reason, the previous highs made at 18,000 and 60,400 would be the last resistances for the period. coming. Strong support exists at 17,350 and 58,200. If these break, the next level would be 17,000-17,050 and 57,250-57,350. The strategy for the week would be to continue selling on rallies and buying on sharp declines. The markets are in a catchment area and they have to decide where they are going in the medium term.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. Opinions expressed are personal)–IANS
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