By Arun Kejriwal
Markets continued to gain ground during the week gone by with gains registered on four of the five trading days. BSESENSEX gained 702.52 points or 1.76% to close at 40,685.50 points while NIFTY gained 167.90 points or 1.43% to close at 11,930.35 points. The broader market saw BSE100, BSE200 and BSE500 gain 1.51%, 1.58% and 1.64% respectively. BSEMIDCAP was up 2.43% while BSESMALLCAP was up 2.56%. The breadth of the market increasing as is apparent from the gains in midcap and Smallcap are the redeeming feature.
Indian rupee lost 28 paisa or 0.38% to close at Rs 73.62 to the US Dollar. Dow Jones was under pressure and lost 270.74 points or 0.95% to close at 28,335.57 points.
In primary market news, the fresh issue of Rs 280 crs and an offer for sale of 7.2 cr shares from Equitas Small Finance Bank Limited, was subscribed 1.95 times. The issue saw QIB portion subscribed 3.91 times, HNI portion undersubscribed at 0.22 times, Retail portion subscribed 2.08 times and Shareholder reservation undersubscribed 0.42 times. The price band of the issue was Rs 32-33.
Vedanta Limited has declared an interim dividend of Rs 9.50 for the current financial year 2020-2021. This is from the dividend which it has received from its subsidiary, Hindustan Zinc Limited of Rs 16.50 per share or Rs 6,972 crs. The dividend received by Vedanta against its holding of 64.92% was Rs 4,526 crs. Vedanta has distributed 77% or Rs 3,500 crs of this amount to shareholders of the company. The dividend by Hindustan Zinc was declared in May 2020. Probably Anil Agarwal was super confident that he would be able to pull of the delisting at the ridiculous price of Rs 87.25 and therefore used the proceeds of the dividend to fund his delisting war chest. Looking at it another way he felt that if he succeeds in delisting, the dividend would not have to be shared with minority shareholders. Failing in the exercise, he has distributed the same as per the company dividend policy after five months.
Incidentally, Hindustan Zinc has announced a second interim dividend of Rs 21.30 per share totalling Rs 9,000 crs on 20th October. Assuming that Vedanta would distribute the similar 77% of the dividend received, this would amount to Rs 12.25 per share. On a simple maths and assuming the price of Vedanta to be Rs 100, the two dividends, one proposed and one expected, total Rs 21.75, a dividend yield of 21.75%. Wonder how many companies if any, can boast of that record. Its high time that promoters stop taking their minority shareholders for a ride.
Incidentally, the government has proposed a strategic sale of Hindustan Copper and with Sterlite’s Tuticorin copper smelter plant shut, this becomes a must acquire proposition for Vedanta. Currently there are just two copper smelters in India and both are owned by state run Hindustan Copper Limited. The others like Birla Copper and Sterlite were importing copper concentrates to make cathodes. Its high time, the Anil Agarwal group mends its way and tries to becoming more investor friendly.
Shares of Vedanta have gained in the past week post the announcement of the meeting for the interim dividend. They gained Rs 9.80, or 10.32% to close the week at Rs 104.80.
The buoyancy in the markets has been helped by FII’s being buyers in the market. On a monthly basis they were net sellers of Rs 11,410 crore in September, which they have more than bought back with net purchases of Rs 13,565 crore in October so far. They had also bought Rs 15,749 crs in August of this year. As long as the inflow is so strong where 2 billion dollars are pumped in a month, it would be fair to say that markets cannot fall. If to this you add the fact that the breadth of the market is increasing you have a setting for the present optimist mood to continue.
On the Covid-19 front, the world saw 4,29,46,446 patients with 11,54,862 deaths and 3,16,73,006 people recovering. In India, the number of patients were 78,64,811 with 1,18,567 deaths and 70,78,123 people recovering. Compared to the previous week, there were 29,86,795 new patients, 40,221 deaths and 17,82,622 people recovering. In India there were 3,70,260 new patients, 4,503 deaths and 4,80,914 people recovering. The number of patients recovering has been consistently more than new patients and the same is a very positive sign. The successful launch of a vaccine is eagerly awaited while some countries have begun mass scale administering of dosages for the same.
The week ahead sees October futures expire on Thursday the 29th of October. The present level of NIFTY is higher by 1,124.80 points or 10.41% for the series. This double-digit gain is huge and quite unnatural. One must of course exclude the fall this year in March2020 when the pandemic broke out and the recovery which followed in April 2020. Expect the bulls to build on the same while the bears would try to claw some of it back. Results so far for the NIFTY pack have been good and are fuelling the rally.
With expiry just four days away, expect markets to be volatile and have larger intraday movement. As long as there is no major negative news flow it would be fair to assume that markets would continue to register gains no matter how much smaller. Positive inflows from FII’s would further help markets to gain ground. Continue using sharp dips to add to positions and rallies to sell.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)