Markets will gain further ground

Interest rates were raised by the FED as expected, but the resilience of Indian markets was commendable. Adding to the comfort was the fact that REITs were buyers on all five trading days.

BSESENSEX gained 990.51 points or 1.65% to close at 60,950.36 points while NIFTY gained 331.35 points or 1.86% to close at 18,117.15 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.91%, 1.97% and 1.93% respectively. BSEMIDCAP gained 2.39% while BSESMALLCAP gained 1.46% respectively.

The Indian rupee gained 3 paisa or 0.04% to close at Rs 82.44 per US dollar. The US Fed at its meeting on Wednesday raised interest rates by 75 paisa in line with expectations. This is the fourth consecutive increase of 75 basis points. The US interest rate band is now 3.75% to 4%.

The Dow Jones had a very volatile Wednesday, the day the rise was announced. After the rise, the markets rallied strongly and gained almost 500 points and after the gain, they fell by 505 points. Effectively, a loss of nearly 1,000 points from the close high. Dow lost the first four days of the week and won smartly on the last day of the week. Dow lost 458.58 points or 1.40% to 32,403.22 points for the week.

The primary market continues to see plenty of action from companies that took advantage of the 135-day standard and mined the markets with results for the June quarter. We’ve seen two companies close their issues in the past week. Two others have had their issues opened in the past week and are expected to close in the coming week. Yet two more would launch their numbers in the current week and staged their roadshows to announce the same. Two more would launch their roadshows on Monday, bringing the total to 8 issues. We will limit ourselves to the first six.

DCX Systems Limited had launched its new issue for Rs 500 crore in a price range of Rs 197-207. The issue was opened between Monday, October 31 and. Wednesday, November 2. The issue was subscribed 76.23 times. The QIB portion was subscribed 95.02 times, the HNI portion 46.20 times and the Retail portion 64.87 times.

The second issue came from Fusion Microfinance Limited, which had tapped the markets with its new issue of Rs 600 crore and a sell offer of 136.95 lakh shares in a price range of Rs 350-368. The number was opened between Wednesday November 2 and Friday November 4. Unlike DCX, the question received a lukewarm response from the non-institutional side. The issue was globally subscribed three times with the QIB unit subscribed 8.53 times, HNI 1.41 and Retail 0.53 times. It seems that the microfinance sector is not currently seeing traction in the markets.

The Bikaji Foods International Limited issue is currently ongoing. The sale offer of 293.74 lakh shares in a price range of Rs 285-300, had opened on Thursday, November 3 and would close on Monday, November 7. At the end of the second day, the issue was subscribed 1.48 times with the QIB unit subscribed 0.03 times, the HNI unit subscribed 1.42 times and the Retail unit subscribed 2.33 times.

The issue by Global Healthcare Limited, which had tapped the markets with its new issue of Rs 600 crore and a sell offer of 507.61 lakh shares in a price range of Rs 319-336, is currently underway. The show opened on Thursday, November 3 and will close on Monday, November 7. At the end of day 2, the issue was globally subscribed 0.50 times with the QIB unit subscribed 0.58 times, the HNI unit 0.97 times and the Retail unit 0.25 times.

The first of two numbers to tap the market in the coming week is Five Star Business Finance Limited, which is tapping the markets with its put offer to raise Rs 1,960 crore at the top end of the group. The issue opens Wednesday, November 9 and ends Friday, November 11. The price range is Rs 450-474. The company is an NBFC that lends to micro-entrepreneurs. It started its operations in Tamil Nadu and derives a dominant part of its business from the four southern states of Tamil Nadu, Karnataka, Andhra Pradesh and Telangana. It charges an average interest rate of 24% and provides loans secured against land and building collateral. Its note size is between 2 and 5 lakh and the average note size is currently Rs 2.57 lakh.

Its revenue for FY22 was Rs 1,253 crore while profit after tax was Rs 453.54 crore. Its base EPS was Rs 16.09 while the fully diluted EPS was Rs 15.92. The stock’s PE band is 28.26 to 29.77, which compares very favorably to the companies the company has benchmarked against. These are AU Bank, Aavas Finance and Aptus Housing. The company is in a niche segment and offers medium to long term appreciation.

The latest issue comes from Archean Chemical Industries Limited, which is tapping the markets with its new issue for Rs 805 crore and a sell offer of 161.50 lakh shares in a price range of Rs 386-407. The issue opens Wednesday, November 9 and ends Friday, November 11. The company is a leading manufacturer of specialty marine chemicals, producing and exporting bromine, industrial salts and sulphate of potash. The company is located on a massive 60,000 acres of land in the Rann of Kutch, where its brine fields are located. Its raw material is seawater.

The company reported revenue of Rs 1,142 crore for FY22 and profit after tax of Rs 188.5 crore. The EPS was Rs 18.26. The company enjoys very high margins due to its stature as a leading global player in size and quality products. The PE band is 21.13 to 22.29 times. This is a company that will provide decent returns for serious players with a long-term holding period.

Looking to the markets in the coming week, expect the markets to build on last week’s gains. The main resistances have been cleared with ease and they are well positioned to move higher. The key levels to watch are the supports at 17,850-17,900 and 60,200-60,300. On the upside, markets are all poised for another 250-300 points on NIFTY and 750-900 points on BSESENSEX in the near term. Tuesday is a public holiday and this could cause a break in the current momentum. Once these targets are crossed and maintained, there would be a serious attempt to challenge historic highs, success or failure yet to be decided.

Trade with a positive mindset and use dips or corrections to add to your positions. Expect markets to continue to rally.