Let’s start with the secondary market, because it’s been a rough patch. Last week marked the fifth negative week in a row, and we saw fresh lows on both benchmarks. The Sensex closed below the psychologically important 75,000 mark, settling around 74,272, while the Nifty broke below its 23,500 support to close at 23,398.
Between the two, the market shed about 1,734 points on the Sensex and 500 points on the Nifty over the week.
Why the market keeps sliding
A few things are converging here. The dollar-rupee pair has been highly volatile, and on top of that, the continued exchange of fire between Iran and the US has once again derailed sentiment globally, we felt the tremors here too.
Crude has pushed to a fresh recent high, with Brent crossing $105 a barrel, and that matters enormously for India given how dependent we are on crude imports. I wouldn’t be surprised if fuel prices get hiked in the near term, which would only sour the market mood further.
For the coming week, we only get four trading sessions since Monday is closed for Ganesh Chaturthi. Adding to the uncertainty, SEBI’s newly introduced margin framework, referred to as the “CAS” system in market circles, has genuinely confused investors and market participants alike.
Nobody has fully understood how it’s meant to work, and SEBI has reportedly received a flood of recommendations to change or even scrap it. Word from SEBI officials is that they planning to relook at the system and possibly modify the rule framework, so we’ll have to wait and watch on that front. That’s also keeping the market sentiment weak.
FIIs have stepped back
On the institutional flow side, the hawkish stance from the US Federal Reserve chief, with clear signals that a rate hike could be on the table, is keeping FIIs on the fence in the secondary market.
They are booking profits on every rise and pulling money out in fairly large amounts. Part of the reason this makes sense for them right now is that many FIIs parked their funds in India at much lower levels in earlier years, so with the rupee sinking, the dollar-rupee arithmetic currently works in their favour when they exit.
Interestingly, their appetite for parking money in the primary market remains far healthier than their conviction in the secondary market.
As always, don’t let GMP be your guide. It’s Grossly Manipulated price, where pricing and operator behaviour remain out of step with fundamentals. Stick to techno-fundamentally sound names, do your own due diligence, and consult your financial advisor before committing capital.
But the primary market is not slowing down
While the secondary market struggles, the primary market keeps roaring ahead. September is proving to be exactly the busy month we expected. Last week alone saw almost 22 IPOs, 12 on the main board and 10 on the SME side, with genuinely mixed and tricky subscription responses across the board.
This week we have 11 more IPOs lined up, five mainboard and six SME.
On listing performance, mainboard IPOs were roughly split, four opened in the green and four in the red, but the gains on the green side were meaningfully larger than the losses on the red side.
On the SME front, only about three IPOs listed positively, with the rest ending in the red, reinforcing what I habve been saying for weeks now: SME remains the segment to approach with real caution.
Names that delivered
Among last week’s mainboard listings, Kanohar Electricals, Karamtara Engineering, Steamhouse India, Manipal Payment and Identity Solutions, and Asset Reconstruction Company of India all had good showings. Rentomojo also received a better response than the market was expecting.
On the SME side, Fly-Hi Maritime and Phychem Technologies looked promising, and Shanti Inorganics was the standout, listing at a 90% premium.
For the coming week, keep an eye on Sonaselection India, SS Retail, Jindal Supreme and Hero Motors. Hero Motors and SS Retail in particular may attract healthy subscription given their reasonably good fundamentals. On the SME side, Om Galaxy is still in its subscription window and worth tracking.
Overall, next week’s primary market float is estimated at around Rs 28,000-29,000 crore in base value, and that much capital moving into IPOs will inevitably pull some liquidity away from the secondary market in the short term.
And then there’s NSE
Topping next week’s calendar, of course, is the big one: NSE has received final confirmation for its IPO, opening September 17 and closing September 21, with listing expected around September 24.
The price band is set at Rs 1,700-1,785 per share, and the company is looking to raise close to Rs 22,570 crore at the upper end, though that’s actually been trimmed by roughly Rs 10,000-11,000 crore from earlier estimates.
Having gone through the numbers myself, my view is that the issue is fully priced, no argument there. But I would still make the case for it, because NSE is an incomparable world leader in derivatives trading and carries the status of India’s premier exchange.
I’ll get into the full picture on NSE, including a rather remarkable story behind who’s steering this listing, in a dedicated piece. For now, know that this single issue will likely set the tone for primary market sentiment through the rest of the month.