Post IT results, markets get a booster dose

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New Delhi, Jan 14 (IANS) The week went by was on predictable lines and we saw markets react to the set of IT results declared on Thursday in a manner which only markets can.

While the net reaction was way above expectations, it was the cause of the explosive move at the markets and what happened thereafter, has given a new lease of life to markets which were consolidating so far.

Markets gained on four of the five sessions and were up for the week.

The losses on the opening day of the week were significant, hence the net gains were substantially lower than what we saw on Friday.

The gains made on Friday were roughly 850 points on BSE Sensex and 250 points on Nifty. The week ended with BSE Sensex gaining 542.30 points or 0.75 per cent to close at 72,568.45 points while Nifty gained 183.75 points or 0.85 per cent to close at 21,894.55 points.

The broader markets saw BSE 100, BSE 200 and BSE 500 gain 0.81 per cent, 0.76 per cent and 0.79 per cent respectively. BSE Midcap was up 0.45 per cent while BSE Smallcap was up 1.56 per cent. The top sectoral gainers for the week were BSE IT which gained 4.58 per cent and followed by BSE TECK in third spot gaining 3.93 per cent.

The Indian Rupee had a strong showing and gained 23 paisa during the week. It closed at Rs 82.92 against the US Dollar. Dow Jones gained on three of the five trading sessions. It closed with gains of 126.87 points or 0.24 per cent to close at 37,592.98 points.

The IPO from Medi Assist Healthcare Services Limited is tapping the capital markets with its offer for sale of 2,80,28,168 equity shares in a price band of Rs 397-418. The issue would open on Monday (January 15) and close on Wednesday (January 17). The issue would garner between Rs 1,127 crore and Rs 1,171 crore. On Friday it completed its allocation to anchor investors where it allotted 84,08,449 equity shares at the top end of the band of Rs 418. 48.41 per cent of the anchor book was allotted to 11 domestic funds through 18 schemes. This shows that the issue is widely distributed among mutual funds, insurance companies and FPIs.

The company is a third party TPA in the health insurance space. It is the market leader and has between 53-55 per cent of the market in this space. It reported revenues of Rs 504.93 crore for the year ended March 23 with a PAT margin of 14.54 per cent.

The reported Pat was Rs 75.30 crore and the fully diluted EPS Rs 10.65. The PE band is 36.66 to 38.60 times. Being a market leader and the first of its kind in the category, the issue would set a benchmark going forward. With fragmented ownership thereafter, not sure whether other players would list from this field. The issue is a tough one to understand and would do well based on perception and growth on better penetration of health insurance schemes going forward.

Coming to the markets and what happened last week, one finds that the IT pack has been under owned and was technically short sold or oversold. This, post the results which were broadly on expected lines and the commentary post the results gave an indication that there has been no deterioration during the quarter, giving the momentum that markets were lacking. The sharp rally in IT stocks led by HCL Tech which gained 7.68 per cent, Infosys up 5.15 per cent, Tech Mahindra 4.68 per cent and TCS up 3.85 per cent, helped the benchmark indices gain and turn the sentiment. Heavyweight Reliance too chipped in with gains of 5.10 per cent which provided substantial weightage to an otherwise range bound index in a consolidation phase.

Readers would recall that post declaration of 5 state election results on Sunday (December 3, 2023), markets had rallied sharply on Monday by 416 points on Nifty and 1,384 points on BSE Sensex. At that time, I was talking of a further rally of 10 per cent plus minus 2 per cent from those levels. It appears we are well on course to do so by the time the country votes in April and mid-May for the general elections 2024. For the record post the Monday (December 4) gains, we are now up a further 1,210 points on Nifty and 3,223 points on BSE Sensex. We have some distance to go but there is even more time remaining. This implies that it would not be smooth sailing, or a one-way move but would have corrections and consolidation on the way.

Coming to the week ahead, we would see markets try to build on the break out sort of move that we have witnessed. Results season is on and stocks would react to results being reported as we saw in the case of the IT pack. It therefore makes sense to move to the large cap stocks and move away from the small cap and midcap space. Over the last few days. FPIs have turned relatively quiet and have sold small quantities in the cash market. Their total sales have been about Rs 3,500 crore over the last week while domestic institutions have bought shares worth Rs 6,900 crore. One now needs to look at the larger picture rather than week to week. The budget would be presented on Thursday (February 1) and while it would be a vote on account type of budget it could have some items for the middle class and also become an election budget.

The strategy for the week would be to look at large cap stocks and play in general on the long side using dips to buy and strong rallies to sell. While the three-to-four-month view is bullish it would be a measured move rather than runaway.

Trade cautiously.

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



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