By Arun Kejriwal
Markets were on fire last week and had a great show, celebrating the upcoming Diwali festival in advance. BSESENSEX was up 2,278.99 points or 5.75% to close at 41,893.06 points while NIFTY gained 621.15 points or 5.34% to close at 12,263.55 points. The broader market saw BSE100, BSE200 and BSE500 gain 5.14%, 4.97% and 4.68% respectively. BSEMIDCAP was up 3.36% while BSESMALLCAP gained 2.22% The top sectoral index was BSEBANKEX which gained 12.25%. There were many stocks from the banking space which registered double digit gains. Indusind Bank was up 26.20% followed by SBI at 15.75%. ICICI Bank, HDFC, HDFC Bank, Bajaj twins Bajaj Finserve and Bajaj Finance were in the double-digit gainers list.
The BSESENSEX and NIFTY are within striking distance of making new lifetime highs on the benchmark indices. The present levels are a mere 380 points on the BSESENSEX and 167 points on NIFTY shy of those levels made on 20th January 2020. Whether it happens on Monday or a day later is difficult to predict but suffice to say that Diwali Muhurat would be with new highs. One must not forget that post covid-19 we had touched levels of 25k on BSESENSEX and 7.5 k on NIFTY in March 2020. This would mean that in under 7 months the markets have been on a roll gaining 2/3rd in value. A phenomenal rise by all standards.
The Indian Rupee lost 10 paisa or 0.13% to close at Rs 74.20 to the US Dollar. Dow Jones in the midst of the Presidential elections gained 1,821.80 points or 6.87% to close at 28,323.40 points. The US has chosen a new President in Joe Biden who has received 290 electoral votes compared to 214 for current President Donald Trump. Counting for three states is yet to be completed. Trump is leading in Alaska and North Carolina while Biden is leading in Georgia. If the present trend is maintained, the final tally would be 306 for Biden against 232 for Trump. In terms of popular votes, Biden leads by about 44 lac votes. There is a possibility of Trump taking the election to the courts and there being some litigation before the final verdict.
Markets have gained significantly and it can be attributed to a large extent to FII buying. In the month of November, FII’s have bought on a net basis 13,399 crs worth of stock so far while domestic institutions have sold worth Rs 6,789 crs. In the month of October, the net FII Purchases were Rs 14,537 crs while domestic institutions net sales were Rs 17,318 crs. In the last two days itself FII’s have bought in excess of Rs 10,000 crs. With domestic institutions facing redemption pressure, there is plenty of scope for them to buy on dips as they would have the opportunity to buy at lower levels when the situation demands and help in supporting the market.
The week ahead sees the mega issue from Gland Pharma Limited tapping the markets. The company is tapping the markets with its fresh issue for Rs 1,250 crs and an offer for sale of 3.48 cr shares in a price band of Rs 1490-1500. The issue size is Rs 6,480 crs at the top end and opens on Monday the 9th of November and closes on Wednesday the 11th of November. The promoter of the company is Fosun Singapore, and the group is a large conglomerate from China. The EPS for the company is Rs 49.88 and the PE multiple is between 29.87-30.07 based on financial year March 2020 numbers. The object of the issue is for fresh capex of Rs 168 crs and working capital of Rs 770 crs. This is India’s largest pharma issue and also one of the large issues otherwise across sectors. In this year this would be the largest issue to hit the capital markets.
Gland Pharma is a contract manufacturer and specialises in injectables. Its top line or revenues have grown from Rs 1,622 crs in March 2018 to Rs 2,633 crs in March 2020. The ED or enforcement directorate had attached shares of Ramalinga Raju, erstwhile Satyam Computer owner and holds 60 lac shares or 3.87% of the pre-ipo capital of the company. These shares are valued at Rs 900 crs at the IPO price and there is every possibility that the ED may sell these shares post listing. The company enjoys net margins of 29.34%. Its NAV is 235.32 as of 31st March 2020. While the PE multiple at about 30 times is in line with other leading pharma companies, the market cap to sales would be a very high number at almost double digit. This is cause for concern.
Saturday the 14th of November would see ‘Muhurat’ trading for ‘Samvat 2077’ being held. There would be a special session held between 6.15pm to 7.15pm at the bourses.
Covid-19 saw the world have 5,02,63,958 patients, 12,56,354 deaths and 3,55,50,153 patients who had recovered. In India we had 85,07,754 patients, 1,26,162 deaths and 78,68,968 patients who had recovered. Compared to the previous week the world saw 38,69,744 new patients, 5,51,889 deaths and 20,62,240 patients who had recovered. In India we had 3,23,672 new patients in the week, 4,013 deaths and 3,77,455 patients who had recovered.
The markets would continue their upward journey with increased volatility. The fact that we are on the verge of hitting new lifetime highs would add to the volatility and ensure sharp two-sided movements. FII buying would add impetus to the markets and provide the ammunition to the bulls. Use sharp rallies to sell and sharp falls to add to positions. The present mood of the markets will stay for some time at the bare minimum.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)