Are markets headed for a new high

New Delhi: The week gone by had plenty of action and markets built on the super booster dose of August 16, when it registered super gains of over 1,300 points on BSE Sensex and 400 points on Nifty. This week saw no jump but, they built on the head start and inched upwards to set up what could be a flourish in the coming week.

BSE Sensex gained 649.37 points or 0.81 per cent to close at 81,086.21 points while Nifty gained 282 points or 1.15 per cent to close at 24,823.15 points. The broader markets saw BSE 100, BSE 200 and BSE 500 gain 1.26 per cent, 1.31 per cent and 1.53 per cent respectively. BSE Midcap was up 1.96 per cent while BSE Smallcap gained 3.39 per cent. During the week, BSE Sensex gained in four sessions and lost a tad in the opening session of the week, while Nifty gained in all five trading sessions. Markets are within striking distance of all-time highs made on August 1, earlier this month.

The Indian Rupee gained 7 paise or 0.08 per cent to close at Rs 83.89. Dow Jones had a decent showing backed by a superlative effort on Friday, the closing day of the week when it gained 462 points. This helped Dow gain 515.32 points or 1.27 per cent to close at 41,175.08 points. Dow gained on three of the five trading sessions and lost on two.

There is a lot of activity happening in the primary markets. Shares of Saraswati Saree Depot Limited which were issued at Rs 160, listed on Tuesday, August 20, debuted at Rs 200 and closed at an upper circuit of Rs 209.95 on day one. The gains made were Rs 49.95 or 31.21 per cent. By Friday, the share witnessed profit-taking and closed at Rs 180.10, a gain of Rs 20.10 or 12.56 per cent on BSE. On NSE, the share closed lower at Rs 177.95, a gain of Rs 17.95 or 11.21 per cent.

The issue from Interarch Building Products Limited which had opened on August 19, and closed on August 21, received excellent response. The price band was Rs 850-900. The issue consisted of a fresh issue of Rs 200 crore and an offer for sale of 44,47,630 shares. The issue was subscribed 93.81 times overall with the QIB portion subscribed 197.29 times, the HNI portion subscribed 130.93 times and the retail portion subscribed 19.5 times. There were 24.42 lakh applications in all.

The second issue to tap the capital markets was Orient Technologies Limited which opened its issue on August 21 and closed on August 23. The issue consists of a fresh issue of Rs 120 crore and an offer for sale of 46 lakh shares, in a price band of Rs 195-206.

The company is an information technology (IT) solutions provider headquartered in Mumbai. The company reported revenues of Rs 602.89 crore for the year ended on March 24 with an EBITDA margin of 9.39 per cent and a PAT margin of 6.87 per cent. Their EPS for the year was 11.80 and the PE band was 16.53-17.46. The company has entered the promising and lucrative business of cyber security which is a crucial and fast-growing area and also enjoying higher margins. The issue was subscribed 154.87 times overall with the QIB portion subscribed 188.79 times, the HNI portion subscribed 310.07 times and the retail portion subscribed 68.98 times. There were 29.26 lakh applications.

With a larger number of participants making money in the markets, the system is flush with liquidity, and one therefore is witnessing huge subscriptions in the primary markets and entire selling of FPIs being absorbed in the market as well. While quarter one results were overall poor, witnessing the lowest growth in eight quarters, there has been no impact on markets whatsoever. While this is a cause of concern, the market mood and sentiment are not only positive but extremely buoyant.

There are two issues opening and closing in the week ahead. The first is from Premier Energies Limited which is opening on Tuesday, August 27, and closing on Thursday, August 29. The issue consists of a fresh issue of Rs 1,291.4 crore and an offer for sale of 3.42 crore shares in a price band of Rs 427-450.

The company is an integrated solar cell and solar module manufacturer with 29 years of experience. The company makes PV (photovoltaic) cells and also manufactures solar modules. The company reported revenues of Rs 3,143.79 crore for the year ended on March 24 and a profit after tax of Rs 231.36 crore. In the first quarter of the current year, it reported revenues of Rs 1,657.36 crore and a profit after tax of Rs 196.16 crore. The EPS for the year ended on March 24 was Rs 6.93 while on a fully diluted basis, it was Rs 5.48. The PE ratio on this EPS is 77.92-82.12. If one looks at the EPS earned by the company in the first quarter after new capacities were added towards the end of the financial year 2024, the same has improved significantly to Rs 5.93 and on a fully diluted basis to Rs 4.70. This is significantly higher than the previous full year’s EPS of Rs 5.48.

The company is expanding its capacity with its own money as well as the objects of the issue also include expansion. This looks like a good opportunity to participate in a large capacity solar company which is an integrated player and has size and scale besides the experience. One should invest for the medium to long term in the company.

The second company to tap the markets is ECOS (India) Mobility and Hospitality Limited. The company is offering 1.8 crore shares through an offer for sale in a price band of Rs 318-334. The issue opens on August 28 and closes on August 30.

The company offers chauffeur-driven mobility providers to corporates in India. The company reported revenues of Rs 554.41 crore for the year ended on March 24 and a profit after tax of Rs 62.53 crore. The EPS for the year was Rs 10.42 and the PE band is 30.52-32.05 times. The growth of the company over the last three years has been phenomenal and one wonders whether this growth is sustainable or not.

Besides the IPOs, PE investors are raising money through secondary markets and every week we witness a number of transactions where shares are sold through bulk deals. Everything on offer gets mopped up and there is no dearth of demand.

Coming to the markets in the week ahead which has August futures expiring on Thursday, August 29, markets would be volatile and choppy. The present value of the August series is higher by 417.05 points or 1.71 per cent at 24,823.15 points. The lifetime highs on an intraday basis and closing basis were made on August 1. These levels were at 25,078.30 points and 25,010.90 points on Nifty, and 82,129.49 points and 81,867.55 points on BSE Sensex. We have closed at 81,086.21 points and 24,823.15 points on BSE Ssensex and Nifty respectively, implying that we are a mere 1,050 points away on BSE Ssensex and just under 200 points on Nifty. This week appears to be the best time to make yet another attempt at creating new highs and going even higher.

So previous tops become immediate objectives and markets have the follow-through momentum post the Jackson Hole event in the US and a sharp 462-point rally on Friday. On the support side, levels of 24,500 around and 80,000 points are decent supports and should hold. The week ahead has two listings as well besides a spate of roadshows and issues opening and closing. With liquidity bursting at the seams and no dearth of the same, the setting is all in place for an imploding week at the markets.

In conclusion, trade cautiously as the possibility of posting a new high, and markets again correct as they did post August 1.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)