New Year to take cues from global markets and control of virus

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The last week of calendar year 2021 ended on a high with stock markets registering gains and gaining ground to end the year with flying colours. BSESENSEX gained 1,129.51 points or 1.98 per cent to close at 58,253.82 points while NIFTY gained 350.30 points or 2.06 per cent to end at 17,354.05 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.97 per cent, 2.12 per cent and 2.26 per cent. BSEMIDCAP gained 2.52 per cent, while BSESMALLCAP was up 3.85 per cent.

The Indian Rupee recovered ground and gained 69 paisa or 0.92 per cent to close at Rs 74.33 to the US Dollar. Dow Jones gained 387.74 points or 1.08 per cent to close at 36,338.30 points. During the week it hit a new lifetime high on intraday basis of 36,679 points and on closing basis of 36,488.63 points. For the year Dow Jones gained 5,731.82 points or 18.73 per cent to close the calendar year at 36,338.30 points.

If one looks at the performance of Indian benchmark indices in calendar year 2021, they were better than the Dow and outperformed it. BSESENSEX gained 10,502.49 points or 21.99 per cent to close at 58,253.82 points. NIFTY gained 3,372.30 points or 24.12 per cent to close at 17,354.05 points. Bank Nifty was comparatively an underperformer and gained 4,217.65 points or 13.49 per cent to close at 35,481.7 points. BSEMIDCAP gained 7,028.65 points or 39.18 per cent to close at 24,970.08 points. BSESMALLCAP was the outperformer gaining 11,359.65 points or 62.77 per cent to close at 29,457.79 points.

December futures expired on Thursday the 30th of December and it was one of the quietest expiries witnessed in a very long time. The net change for the day was a mere 10 points and the range between the high and low of the day was 118 points. The series expired with losses of 332.30 points or 1.89 per cent at 17,203.95 points.

In primary market news, there were three listings which took place last week. The first was HP Adhesive Limited which had issued shares at Rs 274 and listed on Monday. The share closed at Rs 334.95, a gain of Rs 60.95 or 22.24 per cent. By the end of the week the share had gained further closing at Rs 407, a gain of Rs 133 or 48.54 per cent.

The second share to list was on Tuesday from Supriya Lifescience Limited. Shares were issued at Rs 274 and ended listing day at Rs 390.35, a gain of Rs 116.35 or 42.46 per cent. By weekend, shares had gained further to close at Rs 483.50, a gain of Rs 199.50 or 76.46 per cent.

The third and final issue to list was from CMS Info System Limited which listed on the last trading day of the calendar year. The company had allotted shares at Rs 216 saw its shares close day one at Rs 237.40, a gain of Rs 21.40 or 9.91 per cent.

The primary market has been on a roll in calendar year 2019 and over 1.19 lakh crore have been raised through some 68 issues. Seeing the spurt in fund raise, SEBI has introduced some changes in the same at its recent board meeting.

Primary amongst the changes is the restriction in the amount that can be raised for undisclosed acquisitions and general corporate purposes. The new rule states that the amount as a percentage of the fund raise cannot collectively exceed 35 per cent under both heads combined (acquisitions and general corporate purposes) and 25 per cent for acquisitions as a standalone unless details are given.

Secondly the price band has been specified at a minimum of 105 per cent of the price stated. This means that the minimum price band would be 5 per cent. For example, if the price stipulated is Rs 500, then the price band would be Rs 500-525 at the bare minimum.

Thirdly, the anchor allocation would include half the portion to be locked in for 30 days and the balance for 90 days. Fourthly, there are restrictions on the number of shares that can be sold through an offer for sale by investors. In case the holding individually or collectively is more than 50 per cent, they can sell no more than 20 per cent of the shares. If, however there shareholding is less than 20 per cent, they can sell only 10% of their holding.

These measures have been introduced seeing many of the recent tech platform companies which have not followed these guidelines if they had been already introduced. This would help the market see issues more realistic in price and have objects which are more specific in nature rather than being generic.

In term of newly listed shares, of the 20 that have listed since 15th November, 8 are trading below their issue price while of the 9 that have listed since 17th December, 3 are trading below the issue price. Clearly the pressure is telling on the listings and also speaks of the quality and pricing greed of promoters, P E Investors and merchant bankers collectively.

The new mutant, 'Omicron' is keeping people on their toes globally as the number of affected people seems to be rising quite sharply. While fatalities or people being hospitalised has not seen any significant rise, the number of affected people has risen quite sharply. In India, many states have launched precautionary restrictions including night curfews. Its time to be cautious and prevent a third wave in the country. In terms of vaccinations, a total of 145.52 crore vaccinations have been given of which 84.73 crore is the first dose and 60.79 crore are fully vaccinated.

Coming to the markets, the rally over the last fortnight has set the markets in a very interesting scenario. The trading range is roughly 200 points below the present level of NIFTY and about 150 points higher than the present level. As long as these levels are not violated, markets would remain range bound. If, however the range is violated, markets would breakout or breakdown and gain sharp volatility in the direction of the movement.

What would determine this movement is whether FII's continue their selling mode or the new year sees a change. Secondly, how 'Omicron' reacts going forward could be an important factor. Thirdly, the movement of Dow after making a new lifetime high last week is looking vulnerable. If Dow goes into a corrective mode, global markets would follow suit.

The strategy in the coming week would be to take advantage of any large swings that may happen with selling on rallies and buying on dips. While the breadth of the market has improved last week, it may have a lot to do with NAV of mutual funds. Whether this breadth of expansion continues, only time will tell. With the budget due on 1st of February there is every possibility of a pre-budget rally kicking in. Keep your eyes and ears on the market to spot this as and when it happens. Finally, the IPO market would again begin its role with issues gearing up for the small window, pre-budget launch. Let us see how many brave hearts actually make it this time around.

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

--IANS

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