Markets during the last week saw wild gyrations with the first three days seeing a sharp dip followed by a more than equally sharper rise and then yet another dip, to be back on neutral ground. Friday was a nothing day and markets ended marginally up. The week ended with a small negative bias and in what could be termed a highly volatile week.
BSESENSEX lost 30.54 points or 0.05 per cent to close at 58,803.33 points while NIFTY lost 19.45 points or 0.11 per cent to close at 17,539.45 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.20 per cent, 0.29 per cent and 0.38 per cent respectively. BSEMIDCAP gained 1.37 per cent while BSESMALLCAP was up 1.35 per cent.
The Indian Rupee gained 6 paisa or 0.08 per cent to close at Rs 79.80 to the US Dollar. Dow Jones continued to remain under pressure and lost on four of the five trading sessions. It lost 964.96 points or 2.99 per cent to close at 31,318.44 points. It is now down 13.81 per cent on a year-to-date basis. On a similar comparison, the Indian benchmark indices are up about one percent.
India is now the world's fifth largest economy. It squeezed out the United Kingdom. GST collections for the month of August were at 1,43,612 crore. This is the sixth consecutive month that the collection is at Rs 1.40 lakh crore or higher.
The primary market sees the issue from Tamilnad Mercantile Bank Limited tapping the markets with its fresh issue of 1,58,40,000 equity shares in a price band of Rs 500-525. The issue would raise Rs 792- 831.6 crore at the price band. The issue opens on Monday the 5th of September and closes on Wednesday the 7th of September. On Friday, the company completed allocation to anchor investors of 71,28,000 shares at Rs 510. In the last couple of years, one doesn't recall that the anchor book or allocation has been made at a price lower than the top end.
Coming to the bank's performance, it is a 100-year-old private bank dominant in the state of Tamil Nadu. In terms of business as much as 75 per cent comes from the state of Tamil Nadu. The next chunk of business comes from the states of Maharashtra, Andhra Pradesh, Karnataka and Gujarat which contribute about 16 per cent.
The bank has grown very significantly during the Covid-19 pandemic. Its EPS has doubled from 2019-20 to 2021-22 from Rs 28.61 to Rs 42.34 and finally to Rs 57.67. It has a decent asset quality as well. Its gross NPAs were at 1.69 per cent while net NPAs were at 0.95 per cent for the year ended March 2022.
The shares which are being offered at a price band of Rs 500-525 have a PE multiple of 8.67-9.10 times its FY 22 earnings. In terms of book value, the same is at Rs 374.41, which makes the issue at 1.4 times price to book.
Looking at the allotment of anchors, it becomes clear that effectively the new price band is now Rs 500-510 and shares would be allotted at Rs 510. Readers may apply for the shares of the bank considering its fundamentals and pedigree, considering it's a 100-year-old bank. There may be limited upside on listing and investors should apply only for the medium term. Considering its peer group, the bank is adequately priced.
There is a change introduced in the bidding process for IPOs with effect from 1st September. Bids made would have to be blocked by the end of the day before the final subscription figures are announced. This is in relation to the hue and cry that was raised where one saw thousands of applications not being banked post being bid. It was also noticed that issues which were subscribed at the end of the bidding time were actually undersubscribed post the final figures. This would put an end to bidding by investors who wanted to eat the cake and have it.
Coming to the markets in the week ahead, we would see volatility continuing. While FPIs were buyers largely on most days in August, this is not the case in September and they were sellers as well. Things are not the best in US markets and the 75 basis points hike in the meeting to be held on September 20-21 is a foregone conclusion. What and how the markets react would be based on the commentary post the meeting outcome.
Our markets would find strong resistance at the 17,750-800 levels and 59,450-59,550 levels. In case they do manage to break these levels for any reason, the previous tops made at 18,000 and 60,400 would be final resistances in the period coming up. Strong support exists at 17,350 and 58,200. If these break then 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 dips. Markets are in a trading zone and they need to make up their mind where they are headed in the medium term.
(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)