Month: March 2024

The stock of HDFC Bank (₹1,447.90) has been consolidating in recent weeks since a sharp fall in November. The stock finds immediate support at ₹1,400 and ₹1,304. A fall below the latter will change the outlook negative.

On the other hand, it finds immediate resistance at ₹1,465 and ₹1,552. A close above ₹1,600 would change the outlook positive and lift the stock to new highs.

F&O cues: The HDFC Bank April contracts witnessed a steady accumulation of open positions from about 3.6 crore shares to 19.25 crore shares. The counter witnessed a rollover of 95 per cent to April series, a healthy figure.

The HDFC Bank April futures, at ₹1,464.10, against the spot price of ₹1,447.90, indicates long rollovers. Option trading (April) signals that the stock could move in the ₹1,300-1,600 range.

Strategy: Consider a bull-call spread on HDFC Bank. This can be initiated by selling 1,480-call and simultaneously buying 1,460-call. These options closed with a premium of ₹22.40 and ₹32.30 respectively. This strategy would cost ₹9.90 per contract (or ₹5,445 as market lot is 550 shares), which would be the maximum loss. This will happen if the stock rules below ₹1,460.

On the other hand, a profit of ₹5,555 is possible if HDFC Bank rises sharply and moves above ₹1,480. We advise traders to hold the position at least three weeks if the profit is not achieved earlier.

Follow-up: As Maruti Suzuki shares rose sharply last week, we advise traders to book profit in the 12,500-April call.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading

Nifty 50 (22,327) and Bank Nifty (47,125) extended the gain for the second week as they appreciated 1 per cent and 0.6 per cent respectively in the last week. Below is an analysis of the derivatives data of both indices.

Nifty 50

Nifty futures (April expiry) (22,488) broke out of a key resistance at 22,375 and rallied 0.7 per cent last week. As the price rose, the cumulative Open Interest (OI) of Nifty futures increased – it went up to 189.9 lakh contracts on March 28 versus 161.2 lakh contracts on March 22. This indicates a long build-up.

The Put Call Ratio (PCR) of Nifty weekly and monthly options stands above 1. A ratio above 1 is bullish, as it shows traders have sold more put options compared to call options. Participants sell puts when they are optimistic.

The chart of Nifty futures shows a potential for the rally to extend to 22,750, a resistance. The hourly chart shows the confirmation of an inverted head and shoulder pattern. As per this chart set up, the contract can rise to 22,750.

There could be a corrective fall from the current level, possibly to 22,350, before it surpasses 22,580 from here. So, traders can consider long positions.

Strategy: Stay away for now and buy Nifty futures when it moderates to 22,400 and 22,350. Place initial stop-loss at 22,180. When the contract moves above 22,580, alter the stop-loss to 22,400. Tighten the stop-loss further to 22,500 when the contract touches 22,650. Book profits at 22,750.

Alternatively, one can buy call options. Consider buying the 22,200-strike call option (April 25 expiry) (₹476.90) when its premium drops to ₹400. Place stop-loss at ₹280. When the price rises above ₹530, tighten the stop-loss to ₹420. Exit at ₹620.

Bank Nifty

Bank Nifty futures (April expiry) closed at 47,545 on Thursday, thereby posting a gain of 0.5 per cent for the week. But unlike Nifty futures, the cumulative OI of Bank Nifty futures saw a decline – it dropped to 50.2 lakh contracts on March 28 as against 55.8 lakh contracts on March 22. A rise in price along with a fall in OI implies short covering.

The PCR of both weekly and monthly expiry of Bank Nifty options are near 1, indicating nearly similar levels of selling of both call and put options. So, the positioning of option traders does not denote any leaning.

The price action shows positive inclination, especially post the breakout of 47,500 last week. However, Bank Nifty futures is likely to depreciate to 47,000, either from the current level or after moving up to 48,000. Then, it is expected to see an upswing to 48,650. So, traders can wait before initiating fresh longs.

Strategy: Go long on Bank Nifty futures if it falls to 47,200. Keep an initial stop-loss at 46,300. When the contract rallies above 48,000, tighten the stop-loss to 47,300. Liquidate the longs at 48,600.

For lower risk and margin obligation, traders can consider buying the April 24 expiry 46800-strike call option, which closed at ₹1,183.75 last week. Stay on the fence and buy when its price falls to ₹1,000. Initial stop-loss can be at ₹540. When the premium goes beyond ₹1,500, raise the stop-loss to ₹1,200. Exit at ₹1,900.

Mumbai Income tax authorities have issued notices to several startups in connection with the share premium money they received a couple of years ago, said two people in the know.

The tax department has asked for details of the nature and the source of the investments and the credit worthiness of the investors. It has also questioned the valuation and pricing of the shares issued to the investors by the startups, and asked for a justification for the said valuation.

Experts said that these actions of the tax department could be detrimental to the growth of the startup ecosystem and foreign direct investment in the country.

“Almost in all such cases, the funds received by the startups are from reputed investors, who have made substantial FDI investments in India over several years,” said Punit Shah, Partner, Dhruva Advisors.

• BL Explainer. Decoding the angel tax muddle

Angel tax provisions

“Even foreign investments, which were earlier exempt from angel tax, have now come under its ambit under section 56. Fresh notices under section 68 are now adding to the woes of startups. All this doesn’t augur well for an ecosystem that’s supposed to be a key job creation engine,” added Nikunj Bubna, CEO of TheWowBox India.

The Finance Act, 2023, brought investments by non-residents in unlisted Indian companies at a price more than the fair market value within the ambit of angel tax provisions.

Investment valuation

According to Shah, section 56(2)(viib) or section 68 are essentially anti-abuse provisions and should be used by the tax department only in the suspected cases of tax evasion or avoidance and not in cases where capital is received from credible investors. In the past, CBDT has instructed to the tax department not to unnecessarily question the share capital or premium infusion in startups and their valuation, said Shah.

• Read: Angel tax: FinMin notifies valuation methods and guidelines for investors

To justify the high share premium, investors may need to furnish the valuation report for the issuance of securities at a premium and audited financials of the company during and after the fundraising . Documents required to establish investors’ creditworthiness may include the last three years’ tax returns, bank statements, and financials.

To be sure, registered startups that fulfil certain conditions as per the notification issued by DPIIT are exempt from angel tax provisions. A CBDT notification has clarified that assessment in relation to provisions of the angel tax shall not be carried out in the case of such start-ups.

“We have observed income tax officers honouring the notification in the assessment of eligible cases. The section 68 provisions relating to cash credits, however, operate independently of the angel tax provisions,” said Yashesh Ashar, Partner, Illume Advisory.

He added that providing the relevant source of money belonging to resident investors (as a part of the assessment) will require the cooperation of the concerned investors.

Section 56(2)(viib) deals with matters related to “high share premium” and “valuation” of investments in startups. Section 68 pertains to the creditworthiness or bonafide of the investors in such startups.

With both equity and gold prices hovering around record highs, market experts believe investors should review their portfolio and book some profit from equity for allocation to gold, as it has more steam to rally after the US rate cut.

• Also read:Gold imports likely to drop 87% this month on high prices, weak demand

The equity markets have rallied on the back of sustained inflows from retail investors, even as foreign portfolio investors pulled out money at frequent intervals this fiscal.

The bellwether Sensex has rallied a whopping 14,545 points, or 25 per cent to 73,651 points on Thursday, the last trading day of this fiscal, against 59,106 points logged on April 3, 2023.

Incidentally, gold spot prices have also rallied 29 per cent to ₹67,252 per 10 gram on Thursday from an average of ₹52,192 in the June quarter on the back of the Israel-Hamas conflict, the ongoing Russia-Ukraine war, and global concern over inflation.

Though it has now become common for both major asset classes to move in tandem, gold remains attractive given the global geo-political issues, while concerns about the high valuation of equity persist.

Palka Arora Chopra, Director, Master Capital Services, said, “After a dizzying rally, it is always a good time to rebalance a portfolio to lock in returns by booking profit.”

“Investors can consider gold as a hedging tool for inflation and economic uncertainty and diversify investments based on risk appetite,” said Chopra.

“On equity inflows through mutual funds, she said few investors may cancel their SIPs out of fear if the market falls sharply, but aggressive investors should consider it an opportunity for rupee-cost averaging, she added.

‘Gold to fare better’

Mukesh Kochar, National Head of Wealth at AUM Capital, said, “The debt market will also do well from here on as interest rates have peaked out and global interest rates may start coming down around midway through the next calendar year in India.”

Gold is also expected to fare better with the US Fed cutting rates, and the dollar index may come down from here onwards, he said.

Nirpendra Yadav, Senior Commodity Research Analyst, Swastika Investmart, said, “Gold and silver are expected to gain traction on the US Federal rate cut; tension in the Middle East and the presidential election in a major economy this year may elevate bullion prices.

• Also read:A ‘symphony’ of young Chinese aspirations behind gold’s rise to record

Gold prices still look good at the current levels, and investors can add 30-40 per cent gold and silver to their portfolios as the interest cut may kick off inflation in the coming months, he added.

The funds mobilised by India Inc through the IPO route in this financial year was up 19 per cent to ₹61,000 crore compared to ₹52,116 crore raised in FY23.

• Also read:Why India Inc is slow to adopt AI tech

However, excluding the mega LIC IPO of ₹21,000 crore in May 2022, the mop-up increased to 58 per cent year-on-year, according to Prime Database.

Given the buoyancy in the economy, 75 companies hit the primary market compared to 37 in FY23. The average deal size reduced significantly to ₹815 crore in this fiscal from ₹1,409 crore in FY23 due to more number of companies tapping the market.

Among the mainboard IPOs, Mankind Pharma was the largest with ₹4,326 crore, followed by JSW Infrastructure at ₹2,800 crore. The smallest IPO was that of Plaza Wires, which raised ₹71 crore.

Average listing gains

With the key benchmark indices hitting a new high, the average listing gains rose to 29 per cent in FY24 against 9 per cent in the previous financial year.

Of the 75 IPOs, 48 delivered a return of over 10 per cent. Vibhor Steel delivered the biggest return of 193 per cent on debut, followed by BLS E-Services (175 per cent) and Tata Technologies (163 per cent). Over 50 of the 75 IPOs are currently trading above the issue price with an average return of 65 per cent.

Pranav Haldea, Managing Director, Prime Database Group, said of the 75 IPOs that hit the market, 54 issuances were subscribed over 10 times, out of which 22 IPOs were subscribed more than 50 times while 11 IPOs were subscribed more than three times. The other 10 IPOs were oversubscribed between 1 and 3 times.

The response of retail investors was also higher compared to the previous financial year. The average number of retail applications rose to 1.3 million from about 0.6 million in the previous financial year. Tata Technologies, the first Tata Group IPO in two decades, saw the highest number of retail applications with over 50 lakh, followed by DOMS Industries (41 lakh) and INOX India (37 lakh).

• Also read:India Inc. outperforms the globe with 39% women CXOs: Report

In FY24, 96 companies filed their offer documents with the market regulator SEBI compared to 75 in the previous financial year. However, 37 companies planning to raise ₹59,000 crore let their approval lapse, while two looking to raise ₹1,000 crore withdrew their documents. SEBI returned the offer documents of five looking to raise ₹2,500 crore.

Target: ₹250

CMP: ₹201.45

Bharat Electronics Ltd (BEL) was founded in 1954 under the aegis of the Government of India’s Ministry of Defence, with a primary objective to fulfill the electronic equipment necessities of the defence sector.

The organisation is expanding its operations into diverse sectors beyond defense, particularly emphasizing energy storage products for electric vehicles (EVs), including both lithium-ion batteries and fuel cells, as well as the establishment of charging stations. In the fiscal year 2023, BEL’s defense segment constituted approximately 87 per cent of its total annual sales, while the non-defense segment accounted for around 11 per cent.

The contribution from non-defense activities fluctuated between 11 per cent and 20 per cent. The company’s objective is to increase the non-defense sector’s revenue share to 25 per cent by fiscal years 2024-2025.

BEL has been focusing on cost control and indigenization to improve the profitability. Company has been maintaining the ratio of current assets to current liabilities remains at around 1.5. The capital expenditure (Capex) for the first nine months has hovered around ₹400 crore, with projections indicating an increase to approximately ₹700 crore by the end of March ‘24.

The benchmark indices logged gains on the last trading session of the financial year aided by positive global cues.

The Sensex rallied nearly 1,200 points, intra-day before closing at 73,651, up 0.9 per cent. The Nifty rose 0.9 per cent to 22,326.

• Also read: Markets end FY24 on buoyant note amid positive global cues

The indices have gained 28.6 per cent and 24.8 per cent, respectively, this fiscal, beating most other major market indices. The Nifty Midcap and Nifty Smallcap indices have surged 60 per cent and 70 per cent, respectively, with the latter marking its best performance in the last three financial years. The realty, CPSE and infra indices gained over 100 per cent during the year.

“The Nifty is trading in the fair zone in terms of valuations. FY25 is expected to be a year of mega events, with elections to be held in India as well as in key developed economies, clarity emerging on interest rates and India’s inclusion in global bond indices,” said Sanjay Bembalkar, Co-Head Equities at Union Mutual Fund.

Bembalkar prefers large-caps over mid- and small-caps due to better risk-reward to investors, attractive valuations and strong earnings potential. Key risks to watch out for are protectionist trade policies and economic implications from geopolitical conflicts.

Cash market volumes on the NSE on Thursday remained above ₹1-lakh crore. About 52 per cent, or 2,042 stocks, declined on the BSE compared to 1,793 that advanced. Bajaj Finserv, Grasim, Hero Motocorp and Bajaj Finance were the top Nifty gainers, advancing over 3 per cent each.

Key metrics positive

S&P Global on Tuesday had raised India’s FY25 growth forecast to 6.8 per cent on the back of strong domestic demand and a pick-up in exports. India’s CAD/GDP remained steady at 1.2 per cent in Q3FY24.

With valuations a concern, the market will look to the upcoming earnings season for assigning earnings multiples, said Joseph Thomas, Head – Research, Emkay Wealth Management.

Other markets

Most Asian indices ended in the red on Thursday, with Nikkei 225 losing the most at 1.46 per cent. European indices were trading marginally in the green. The US indices ended higher on Wednesday, with the S&P 500 hitting a fresh high. The UK fell into a shallow recession last year as its gross domestic product fell by 0.3 per cent in the last quarter of CY23, after a decrease of 0.1 per cent in the previous quarter.

In the US, data on jobless claims, gross domestic product, consumer sentiment, personal income, consumer spending and personal consumption expenditure will be released on Thursday and Friday.

The market will also look to the US Fed Chair’s speech on Friday for interest rate cues. In India, RBI’s monetary policy committee meeting is scheduled next week.

All major markets will remain closed on Friday.

India got overseas flows to the tune of ₹3.33-lakh crore, or $40.4 billion, in equities, debt and hybrid instruments put together this financial year, a record for any year. This is 25 per cent higher than the previous high of ₹2.67-lakh crore garnered in FY21.

Equity flows stood at over $25 billion, more than flows received by all other Asian markets except Japan, which received $59.5 billion. China, on the other hand, saw outflows of over $67 billion in the 12 months to December. Some of the flows could have made their way into India.

According to reports, emerging market investors in the US are increasingly favouring exchange-traded funds that avoid exposure to China. There is a noticeable uptick in interest towards MSCI ex-China ETFs.

India’s market cap is currently the fifth largest globally, but India’s weight in global indices is still low. This should change as market free float rises and some weight anomalies get sorted out, according to Jefferies. India will become a $10 trillion market by 2030 — impossible for large global investors to ignore, the brokerage said in a recent note. The market depth in India has also increased considerably over the last few years, with the number of stocks with a market cap of more than $1 billion nearly doubling to 500.

“The flows have largely been driven by the performance of our economy which has done well despite geopolitical conflicts, Covid, and rate action by the US Fed. Quite a lot of the growth is domestic-led and there is still scope for further improvement given the migration to urban areas,” said UR Bhat, Director of Alphaniti Fintech.

Bhat added that the PLI schemes and the China plus one story had helped the cause of Indian manufacturing. The massive investment in infrastructure modernisation is helping companies in the materials, real estate and construction space. Banks now have cleaner balance sheets with low NPAs which augurs well for the economy as a whole.

Global bond index inclusion

FPIs have invested $14.4 billion in Indian debt, higher than all other years except FY15 and FY18. Investors have taken a shine to government bonds since September last year, anticipating India’s inclusion in global bond indices. Another $1.5 billion of FPI money has flowed into hybrid instruments, data from NSDL showed.

“An interesting feature of the foreign portfolio investment in India this fiscal is the steady growth in debt investment in sharp contrast to the volatile equity investment,” said V K Vijayakumar, Chief Investment Strategist of Geojit Financial Services.

The inclusion of Indian bonds in the JP Morgan EM Bond Fund and Bloomberg Bond Index is expected to bring in around $25 billion, starting June this year.

While inflows will continue, Vijayakumar believes a sharp surge in debt flows is unlikely, given the rise in US bond yields in the past few days. “If the differential between developed market bond yields, particularly US bonds, and Indian bond yields decline, the debt inflows will moderate,” he said.

Student recruitment solution provider Crizac has filed preliminary papers with markets regulator SEBI to raise up to ₹1,000 crore through an initial public offering (IPO).

The IPO, with a face value of ₹2 per equity share, is entirely an offer for sale (OFS) by promoters, Pinky Agarwal and Manish Agarwal, with no fresh issue component.

The OFS consists of the sale of equity shares of up to ₹841 crore by Pinky Agarwal and up to ₹159 crore by Manish Agarwal.

The offer is being made through the book-building process, wherein not more than 50 per cent of the net offer shall be available for allocation on a proportionate basis to qualified institutional buyers, not less than 15 per cent of the net offer shall be available for allocation to non-institutional investors, and not less than 35 per cent of the net offer shall be available for allocation to retail individual investors. The offer includes a reservation for subscription by eligible employees of the company.

Based in Kolkata, the company processed more than 3.82 lakh student applications and collaborated with over 140 global universities.

“We are already one of the largest student recruitment solutions providers from India into the United Kingdom with a market share of close to 13 per cent in terms of the number of students going from India to the UK to pursue higher education in the year 2023,” Crizac Limited said in its draft red herring prospectus (DRHP).

Crizac Limited’s proforma consolidated revenue from operations during the fiscal year 2023 increased 79.47 per cent to ₹472.97 crore. Profit after tax grew 65.50 per cent to ₹112.14 crore for the last fiscal.

NSE Nifty was up by 0.69 per cent or 151.45 points to 21,156.40, while the BSE Sensex was at 72,978.73 up by 0.70 per cent or 504.49 points. A total of 3,314 stocks were actively traded, of which 1,987 advanced, while 1,216 declined and 111 stocks remained unchanged, where 59 stocks hit a 52-week high and 63 stocks hit a 52-week low at 10 am on Wednesday.

Dr V. K. Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Market is likely to continue in the consolidation mode for a couple of days more, and then take a new directional trend starting April. The undertone of the market continues to be bullish, supported by strong economic fundamentals. A significant structural trend in the market is the sustained flows into equity mutual funds, which are gathering momentum. This will ensure resilience in the market, with dips getting bought.

“Midcaps have again become the segment of activity, particularly for retail investors. This is because there is no institutional selling pressure in mid-caps, unlike in large-caps, where institutions, including FIIs, have large holdings. The financials are likely to lead the rally along, with capital goods and automobiles in early April. Credit growth in the economy is impressive at around 20 per cent, and this will help boost banks’ profitability. The Q4 results of banks will be good.”

Major gainers on the NSE at 10 am include, Reliance (2%), BPCL (1.68%), Adani Ports (1.52%), Maruti (1.31%), ONGC (0.94%. ). The major losers include UPL (-0.82%), Apollo Hospitals (-0.37%), Infosys (-0.31%), Wipro (-0.29%), and Divi’s Lab (-0.25%)

The BSE small-cap was up by 0.70%, and the mid-cap was up by 0.33%, indicating gains

BSE Limited is “fully geared” to launch the beta version of T+0 settlement for 25 securities starting March 28, its MD & CEO Sundararaman Ramamurthy said on Tuesday.

On strategic plans to increase its share in India’s derivatives market, Ramamurthy emphasised BSE’s approach as a complementary exchange, fostering mutual support between BSE and NSE for symbiotic market growth.

“It is not question of competition and making myself to be the go to exchange for derivative products. It is the market growth, market vibrancy that are driving us (BSE and NSE). It is not one upmanship or competition we are looking at to drive ourselves up,” Ramamurthy said in an interview.

• Also read: After index play, BSE may look to breathe life into stock derivatives

Ramamurthy said that BSE, which was trying to find its feet in the derivatives segment, had share of 15 per cent on the notional side and 6 per cent share of premium. 

“This is clearly indicative of the fact that we have a long way to go and we are working on it. We are working in multi pronged way to increase number of market participants and FPIs. We also want more volumes in the later weeks monthly contracts and futures. Broadbasing of contract is what we are looking at and in the process make BSE more and more vibrant and meaningful for the market,” he said.

Over the last ten months, BSE had come in for lot of attention for the progress it made in the derivatives segment through launch of Sensex and Bankex (relaunch) related derivative products. 

• Also read: BSE asks members to avail other bank facilities

T+0 settlement 

Ramamurthy, who has been at the helm of this exchange since January 2023, said that BSE has developed the software and had a mock trading session on March 23. “We feel the mock trading was successful from our parameters and we have informed regulator as well. We are slated to go live on Thursday. We have been engaging with brokers including big ones so that they get the benefit of T+0 for their clients. We hope it will be successful”.

He also highlighted that it was “not a full fledged migration,” but only an option at a beta stage. 

“From our perspective, we are ready to go live on Thursday for the beta version as regards technology as well as exchange and clearing corporation is concerned,” Ramamurthy said.

CDSL Stake

Ramamurthy said that BSE was not looking to sell or dilute its 15 per cent stake in CDSL –the country’s only listed depository.

“Our stake sale last year was a regulatory requirement to bring it to an accepted level. Since we have already achieved regulatory standard, there is no need for us at this point of time and there is no thought process at this point of time for us to sell any further stake in CDSL,” he said.

Currently, a stock exchange is allowed only to hold a 15 per cent stake in a depository. In January 2021, SEBI had capped the shareholding limit at 15 per cent for institutions and reduced it from earlier 24 per cent.

SME platform

On the SME platform activity, Ramamurthy said that BSE had in last 14 months introduced stringent criteria and raised the bar on listing of SMEs. 

“We have also recently reviewed all criteria for migration from SME to main board. We have revised it. We want only very good companies migrating from SME to main board,” he said. 

“Entry criteria, listing criteria and migration parameters have all been tightened and stringent risk management measures are in place that will take away surveillance concerns”.

Domestic markets are expected to open flat with a negative bias on Tuesday after a long weekend. Analysts expect the market to remain volatile ahead of the monthly F&O settlement. As fiscal 2024 comes to an end, adjustments in accounts will also keep the market volatile.

Experts said stocks are likely to gain towards the weekend due to mutual funds’ NAV propping. However, with Friday being a holiday due to “Good Friday,” analysts expect trading interest to remain low.

The domestic markets remained volatile during the week, with the expectations and outcome of the FOMC meeting being the focal point. With the FOMC meeting indicating rate cuts in its announcement, sentiment improved marginally towards the end of the week.

• Buzzing stocks. Stocks that will see action today: March 26, 2024

“Going forward, volatility is expected to be at the forefront as valuation-related concerns still linger. The earnings season will be critical to gauge the actual “froth” in the markets,” said Joseph Thomas, Head of Research, Emkay Wealth Management.

Gift Nifty at 22,125 against NIfty (April) futures close of 22,335.35 and Nifty (Mar) futures close of 22,165.45 signals a downward bias for domestic markets. However, equities across the Asia-Pacific region were mixed in early deal Tuesday.

Analysts expect the market to remain stable and may recover in the second half of the trading session.

However, the focus would be on foreign portfolio investors, who, of late, turned sellers. They said debts will attract more inflows going forward.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: “An interesting feature of the foreign portfolio investment in India this fiscal is the steady growth in debt investment in sharp contrast to the volatile equity investment. This rising trend in debt investment is evident in March, too, with inflows of ₹13,223 crore in debt through 22nd March.

The fundamental reason for this sustained FPI flow into debt is the inclusion of Indian bonds in the JP Morgan EM Bond Fund and Bloomberg Bond Index, which is expected to bring in around $25 billion. This investment will begin only by June 2024, and, therefore, FPIs are doing some front-running in view of this potential investment, he said.

FPI inflows into debt are likely to continue going forward. However, a sharp surge in debt flows is unlikely since the US bond yields have also risen in recent days. If the differential between developed market bond yields, particularly US bonds, and Indian bond yields decline, the debt inflows will moderate, he further said.

Some analysts expect a recent strong correction in mid- and small-cap has provided buying opportunities at select counters.

According to Emkay Global Research, “the correction in March is an entry opportunity from a 6-12 month perspective, in our opinion.”

Stretched valuations catalysed the fall, and there are worries about liquidity risk in SMID funds. Fundamentals remain strong with broad-based earnings growth continuing in FY25, albeit with some deceleration, it said, adding that “We expect the market to rebound in 3-6 months, when SMIDs would start to outperform again and the ‘hide in large-caps’ trade would unwind.”

Small- and mid-cap schemes are likely to see lower inflows in March after the recent correction in the space and the regulatory diktat to conduct stress tests on such schemes, said industry officials.

• Also read:MF small-cap schemes plunge into the red as market trembles

About two-fifths of equity flows in the past two years have gone to such schemes, said experts. Inflows into small cap funds in the first 10 months of this fiscal stood at ₹37,360 crore, 69 per cent higher than the amount collected in FY23. Flows in mid-cap schemes this fiscal have also surpassed the ₹20,205 crore garnered the previous year.

Distributors and advisors are now asking clients to park a larger share of their incremental money in flexi cap, large cap, large and mid-cap and multicap schemes instead of small and mid-cap funds.

“Investors have been chasing returns,” said Swarup Mohanty, chief executive of Mirae Asset Mutual Fund. “We have seen a build-up of froth in the small and mid-cap space and some of the incremental flows which could move to other equity categories and even hybrid funds.”

The Nifty Midcap 100 and Nifty Smallcap 100 have slid 3.7 per cent and 6.6 per cent respectively in the last one month. Market observers expect large caps to relatively outperform the broader market in the months ahead.

B Gopkumar, chief executive of Axis Mutual Fund said investors are preferring multicap funds over flexi caps as the former invests an equal portion in small, mid and largecap stocks whereas flexi caps are tilted towards large caps. “Multicap funds have built a three-year track record and may see greater investor interest going forward.”

According to Amol Joshi, a distributor, there won’t be a substantial reallocation from existing funds resulting in shifting of monies from small and mid-cap schemes to other equity categories. Fresh funds, however, may find its way into ‘large and mid-cap’, flexi cap or multicap schemes, driven more by intermediaries rather than investors themselves.

“Investors convinced about a sustained rally in mid and small cap schemes may gravitate towards multi-cap schemes. Lumpsum money could go to PMS schemes, especially for investors who have a lot of conviction in mid and smallcaps and a higher risk appetite,” said Joshi.

HSBC Global Research prefers largecaps but sees opportunities in the current mid-cap sell-off too. The research house remains constructive on the broader market and ruled out any deep sell-off in mid-caps from current levels.

It said that mid-cap valuations had come down to the five-year mean and that the mid-cap market breadth had declined to 73 per cent from 90 per cent and above at the beginning of the year (60 per cent being the normal cycle average breadth) — signalling some potential but limited downside.

• Also read:Here’s how you can chart your financial journey for FY24-25 

“After the recent correction, many quality companies have approached their key support. Investors should focus on accumulating quality stocks from a long-term perspective,” ICICI Securities said in a recent note.

Asian Paints Ltd. said the Environment Engineer of the Gujarat Pollution Control Board, Gandhinagar, imposed an interim environment damage compensation (EDC) of ₹10 lakh on the company on March 6, 2024.

According to the company’s stock exchange filing, the direction under Section 31A of the Air (Prevention and Control of Pollution) Act, 1981, does not mention any violation or contravention committed.

“The company was reviewing the said direction to understand the rationale for the EDC levied, as all the statutory, safety, and environment-related norms at the under-construction project were followed,” it said.

Asian Paints added in its disclosure that there was a minor fire incident in the under-construction premises in Ankleshwar, Gujarat, on December 22, 2023. The same was controlled immediately and there was no casualty.

In addition, the company revealed that Pallavi Shroff would not be able to continue for a second term as an independent director on account of several new projects that her firm has undertaken, leading to enhanced professional and time commitments. Her term of appointment concludes on March 31, 2024.

Asian Paints stock closed at ₹2,844.80 on the NSE, up by 0.84 per cent on Friday’s trade. The market is closed today, March 25, on account of Holi festival.

The shareholders of Religare Enterprises have voted against both the company’s proposal to invest in its subsidiary MIC Insurance Web Aggregator and the proposal changes to the Article of Association.

• Also read:All disclosures on MIC investment made: Religare Enterprises

With regards to the process initiated for getting shareholders approval through e-voting for the special resolutions, the company in a statement said on basis of the scrutiniser report received the votes polled in favour of the special resolutions could not cross the requisite threshold required for approval and the same has been defeated.

Of the overall investors of 62 per cent of the outstanding shares who participated in the voting process, 74 per cent were against the proposed investment in MIC.

Though 68 per cent of investors who polled have favoured the amendment to the Article of Association, the scrutiniser said 14 members holding 6.98 crore shares abstained from voting and one member voted less by 2.07 lakh shares than he held.

Hence, the scrutiniser did not consider voting on these shares as valid votes, said the report.

The company was seeking shareholder’s approval to invest up to ₹15 crore in MIC, along with ratification of a past investment made in December, 2023.

However, proxy advisory firm InGovern has recommended shareholders of Religare Enterprises to vote against the resolution proposing an investment in MIC. InGovern has raised questions over the rationale of the deal citing lack of disclosures, details and absence of any co-relation with the overall core business of REL.

InGovern has highlighted that REL is already undergoing an uncertain phase and a regulatory probe. Further, as there is an imminent change in promoters and management which may take place post the takeover by the Burmans, the proposed investment must be kept at bay at this juncture, it said.

InGovern emphasised that the proposed investment amounts to a wrong capital allocation at a time when there are significant upcoming payables in the form of loans and existing capital that must be deployed in its core business. Therefore, the proposed acquisition does not fit in REL’s overall core business and amounts to wrong capital allocation, it said.

• Also read:InGovern against Religare Enterprises’ investment in MIC

The amendment to Article of Association was to delete the provisions in the Shareholders Agreement that was entered between Religare Enterprises and erstwhile promoters Malvinder Mohan Singh, Shivinder Mohan Singh and others.

Stock markets would be driven by global trends and foreign investors’ trading activity in the holiday-shortened week, analysts said adding that key equity indices may face volatile trends amid the monthly derivatives expiry on Thursday.

• Also read: Index Outlook: Sensex, Nifty 50: Outlook is still unclear

This week markets will have just three trading sessions. Equity markets will remain closed on Monday for Holi and on Friday for Good Friday.

“This week will be shorter due to market closure on both Monday for Holi and Friday for Good Friday. As a result, trading volumes may be lower with limited market cues. However, volatility remains a possibility as we approach the March F&O expiry and the financial year-end,” Santosh Meena, Head of Research at Swastika Investmart Ltd, said.

Last week, the BSE benchmark climbed 188.51 points or 0.25 per cent, and the Nifty went up by 73.4 points or 0.33 per cent.

“This week being a truncated week and the derivatives’ monthly expiry, we might see some volatility while Nifty is likely to consolidate at higher levels. Also, the US GDP data and other key economic data would keep investors busy,” Siddhartha Khemka, Head – Retail Research at Motilal Oswal Financial Services Ltd, said.

Movement in global oil benchmark Brent crude and rupee-dollar trend would also be watched by investors.

The rupee depreciated 48 paise to settle at an all-time low of 83.61 against the American currency on Friday, tracking a surging greenback against major crosses in the overseas markets and weak Asian peers.The rupee had earlier recorded its lowest closing level of 83.40 on December 13, 2023.

Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, said foreign institutional investors offloading shares coupled with a sharp fall in the currency level has been indicating that the road ahead for equity markets could be bumpy.

“This week is a holiday-shortened one and we expect volatility to remain high due to the scheduled expiry of March month derivatives contracts. Besides, participants will continue to take cues from the global indices, especially the US markets, which are moving from strength to strength with every passing week,” Ajit Mishra, SVP – Technical Research at Religare Broking Ltd, said.

A recent trend in the primary market offers a valuable lesson for traders, especially those who wish to bet on high subscription figures. With certain company IPOs being fully subscribed within minutes or hours, there arises a temptation for some to hastily join the fray in pursuit of substantial gains, either upon listing or immediately thereafter.

However, the recently listed five companies — Krystal Integrated Services, Popular Vehicles & Services, Gopal Snacks , JG Chemicals and RK Swamy — that saw a decent to strong interest from investors, especially retail, gave a warning to those investors.

For instance, JG Chemicals – whose IPO received a strong response of 28.52 times – tumbled 16.52 per cent on Day 1 of listing itself. In fact, the IPO attracted all category of investors with QIBs bidding 32.33 times, high net worth individuals (48 times) and retail investors (18 times). Against IPO price of ₹221, the stock closed on Day 1 at ₹184.80 and is yet to breach the IPO price.

Even the stock of RK Swamy, a composite company that goes beyond advertising in the marketing space, also suffered. The IPO was subscribed nealry 26 per cent but on the listing day the stock fell 8.6 per cent. Against IPO price of ₹288, the stock slipped ₹262.20 and tumbled to a low of ₹227.65 and is currently hovering around ₹275.

SEBI’s caution

One of the main reasons for the lacklustre performance of listed IPOs is the huge sell-off in mid- and small-cap stocks in the secondary market, after warnings by SEBI chief Madhabi Puri Buch. On the small- and mid-caps, Buch said the regulator had analysed the data and, in some cases, the “valuation parameters are off the charts and not supported by fundamentals and appears to be a case of irrational exuberance.”

However, SME-IPO market still looks vibrant both on subscription and performance metrics. Signoria Creation, which was subscribed 666 times, gained over 110 per cent on listing.

Desi bourses are global leader

A recent report by financial consultancy and advisory firm EY said that the Indian stock exchanges have emerged as global leaders in IPOs for 2023. India’s stock exchanges have secured the top position worldwide in terms of the number of IPOs, with no cross-border deals reported. Similarly, the Small and Medium Enterprises (SME) markets also showcased a remarkable growth, EY added.

However, though oversubscription of an IPO is a good sign of demand, the investment decision should not be based on that criteria alone. In bullish markets, IPOs often see robust demand. In certain instances, operators subscribe to these issues to generate quick profits. Some even borrow from financial institutions to amplify their subscription volume. The heightened demand also drives up the grey market premium of these stocks, thereby attracting investors. Consequently, the heavy demand for IPOs leads to significant listing gains, as those who missed out on the initial allotment attempt to accumulate shares on the listing day.

Fundamental and pricing should always be the primary criteria for investment decisions, besides integrity of management. Equity investment in a sound company should be a long-term goal and that holds true for IPO, too.

Target: ₹140

CMP: ₹122.70

Punjab National Bank`s return ratios have been still depressed versus its peers due to higher provisions and high operational costs but is likely to improve hereon. Earlier, credit cost was higher led by higher net NPA book. Lower slippages trend, strong recoveries & upgrades and net NPA ratio below 1 per cent is likely to help in faster normalisation of credit cost from hereon.

Moreover, lower retirement-related provisions/ wage settlement arrears are likely to reduce the cost pressure. The bank is eyeing ~12-14% loan growth going forward. The bank’s excess liquidity profile (credit-deposit ratio about 69 per cent, LCR about 140-150 per cent) in an environment of deposit growth challenges, places it well to grow the book without worrying about deposit growth. A healthy loan growth outlook, ability to manage NIMs and lower opex growth is expected to lead strong PPoP growth.

Overall, asset quality outlook continues to remain stable. Lower slippages formation and healthy recoveries are likely to boost asset quality further along with net NPA below 1 per cent will help in faster normalisation of credit costs. Healthy PPoP growth and normalisation of credit costs should drive a strong improvement in return ratios in FY25. We expect RoA/RoE to be at 0.9-1.0 /12-13 per cent in FY25.

Target: ₹1,562

CMP: ₹1,280.95

Adani Ports and SEZ (ADSEZ) has consistently gained market share, driven by organic growth from its Gujarat-based ports and through strategic acquisitions at reasonable valuations. The turnaround of these acquired assets has accelerated its market share gains. We expect market share gains to continue as new acquisitions have turned around (Karaikal and Dighi) and with the commissioning of new assets, namely Vizhinjam, Colombo and Haldia.

So far, ADSEZ has established a presence at Haifa (Israel), which is at one end of the proposed IMEC (India Middle East Corridor). If there are acquisitions at the EU end, ADSEZ’s ability to divert cargos from the geopolitically volatile Red Sea-Suez region to IMEC could drive volume growth. Additionally, as ADSEZ aims to be an integrated logistics player in India, we expect its market-share gain in container rail (container and bulk) and warehousing to accelerate in FY24-27.

We value port assets on a DCF basis and estimate capex at INR60b p.a. and ROCE level of 16 per cent to arrive at our TP of ₹1,562. We initiate coverage on ADSEZ with Outperformer.

Key risks are weaker-than-estimated volume delivery and deteriorating Group’s financials, leading to elevated share pledges.

Equity markets open lower on Friday. The Sensex declined by 222.49 pts or 0.31 per cent to trade at 72,418.70 as of 9.38 am, while the Nifty 50 was down by 56.70 pts or 0.26 per cent to trade at 21,955.25.

All sectoral indices except IT and auto traded in green as of 9.41 am. Nifty IT stocks dragged 3.13 per cent to trade at 34,899.60. Nifty auto slid 0.09 per cent to trade at 20,681.35. Nifty realty stocks rose over one per cent to trade at 871.15.

Commenting on the Nifty outlook, Anand James, Chief Market Strategist, Geojit Financial Services, said, “While the early upswings evolved on anticipated lines yesterday, it took a bit further than the 22,032 for the momentum to fully ease and force a turn lower. But as maintained yesterday, we will persist with a buy-on-dips approach, until we head into the 22,140-220 region. However, inability to push beyond 22,070, or a direct fall below 21,970 would weaken the upside prospects, but we would wait for a break beyond the 21,810 region to reconsider 21,400-20,900 as downside objectives.”

Vaishali Parekh, Vice President – Technical Research, Prabhudas Lilladher Pvt Ltd, said that the support for the day is seen at 21,900 level while the resistance would be seen at 22,200.

• Also read: Stocks that will see action today—March 22, 2024

Shrikant Chouhan, Head Equity Research, Kotak Securities, said, “For the bulls, 21,900/72,300 should act as a trend-deciding level. Short-term resistance lies at 22,080 and 22,150/72,900-73,000 at higher levels. However, if the market falls below 21,900/72,300, traders may choose to exit long positions as the market could retest 21,850-21,800/72,100-72,000 levels.”

About the Bank Nifty, Chouhan stated, “If it crosses the level of 47,000, expect a continuation of the pullback; otherwise, it could retest the levels of 46,500 or 46,200. Trade according to the given levels.”

Stocks such as BPCL (1.57 per cent), Cipla (1.30 per cent), Sun Pharma (1.26 per cent), Apollo Hospitals (1.26 per cent), and Bajaj Auto (1.11 per cent) were the top gainers on the NSE as of 9.43 am, while HCL Technologies (-4.61 per cent), LTIMindtree (-3.49 per cent), Wipro (-3.48 per cent), Infosys (-2.92 per cent), and Tech Mahindra (-2.55 per cent) stocks underperformed.

All Nifty IT stocks traded lower by over 2 per cent. The major losers were HCL Tech, LTIMindtree, Persistent Systems, Wipro, and Coforge.

Stocks to watch

Reliance Power stock is locked in upper circuit at ₹6.27, higher by 5 per cent on the BSE.

Shares of eMudhra continue to trade higher, currently at ₹739 on the NSE, higher by 6.39 per cent, recording a 52-week high.

D B Realty stock rose 2.50 per cent as of 9.35 am on the NSE to trade at ₹209.35. The company has informed the exchanges regarding a one-time settlement, stating it as a positive development, as the long-pending issue between the Bank of India and the company stands resolved without any liability whatsoever to the company. 

Muthoot Capital Services Ltd has completed a securitisation transaction, raising an amount of ₹61.44 crore by assignment of loan receivables aggregating to ₹66.07 crore. Shares rose 2.26 per cent to trade at 289.45 as of 9.51 am.

Gensol Engineering has secured EPC order from a power generation utility in Maharashtra. The project involves the development of a 100 MWAC/135 MWp ground-mount solar PV power project across 500 acres in Maharashtra with a total order value of ₹520 crore. The stock inched up 0.69 per cent on the NSE as of 9.52 am to trade at ₹885.60.

HSBC Global Research prefers large-caps but sees opportunities in the current mid-cap sell-off too. The research house remains constructive on the broader market and ruled out any deep sell-off in mid-caps from current levels.

It said that mid-cap valuations had come down to the five-year mean and that the mid-cap market breadth had declined to 73 per cent from 90 per cent and above at the beginning of the year (60 per cent being the normal cycle average breadth) — signalling some potential but limited downside.

HSBC said the mid-cap premium to large caps had fallen to about 17 per cent from 30 per cent in January, which appears to be in the mid-cycle range.

Correction in 2018

Comparing the current sell-off to that of 2018, the research house noted that both periods align with nearly four years of prior outperformance of small- and mid-cap names over the broader market. The bull run preceding the correction exhibited similar trends in both contexts, with small-cap and mid-cap compound annual growth rates (CAGRs) of about 30 per cent and 27 per cent, respectively.

What is different this time is that the domestic macro is now much stronger with a 6.9 per cent GDP growth rate versus 3.9 per cent in 2018. The 2018 crash was driven by a broader market sell-off on peak valuation (Nifty premium of 23 per cent premium to previous five-year mean) while the broader market valuation today was still palatable (Nifty premium of 8 per cent to five-year mean).

The year 2018 was characterised by several other adverse events such as the Infrastructure Leasing & Financial Services (IL&FS)-led crisis, LTCG tax and the global tightening cycle. In the current context, there is hope of rate cuts in the second half of the year. What’s more, retail flows through SIPs have more than doubled today to a ₹160-lakh crore plus monthly run rate, which should provide continued support to the market.

Earnings of mid- and small-cap stocks witnessed a sharper downgrade in 2018 on rich expectations (22 per cent), while the current expectation at 15 per cent is more realistic, said HSBC.

“Small-cap and mid-cap corrections have triggered some concern as to the possibility of a deeper correction as in 2018. We think the current context is a lot more favourable than that of 2018. In aggregate, a fall of 20-30 per cent is unlikely in our view. Nonetheless, we prefer large-caps in 2024, but see mid-cap opportunities in sell-off too,” HSBC Global Research observed.

BSE Sensex traded higher by 570.15 or 0.79 per cent at 72,671.84 at 9.38 am, Nifty 50 rose 175.60 or 0.8 per cent to trade at 22,014.70.

Nifty smallcap 100 was up 1.96 per cent at 14,879.05, and Nifty midcap 100 rose 1.54 per cent at 46,626.35.

All sectoral indices traded in green. Nifty metal topped the chart with a 2 per cent gain at 8,018.50. Indices of bank, financial services, oil & gas, private bank, media and PSU banks traded over 1 per cent as of 9.43 am.

• Also Read: Stocks that will see action today—March 21, 2024

Commenting on the nifty outlook, Anand James, Chief Market Strategist, Geojit Financial Services, said, “Expect early positivity that could ease on approach to 22000. A turn lower from this region is not unexpected, but we will look forward to buying as long as above 21810. Direct rise above 22032 could call for 22140- 220, but with low visibility on further rise as maintained yesterday too, especially with 22400 appearing a stiff hurdle. Alternatively, inability to float above 21810 could expose 21400-20900.”

Prabhudas Lilladher’s Vice President of Technical Research, Vaishali Parekh, said that the support for the day is seen at 21900 level while the resistance would be seen at 22100.

• Also Read: Political stability to bode well for market sentiment: UBS

Shrikant Chouhan, Head Equity Research, Kotak Securities, said, “We believe the market has started a pullback to the recent sell-off between 22525 and 21710, which could last a minimum of up to 22250. Traders can hold or create long positions with a final stop loss at 21800 on a closing basis.” Chouhan remarked that the bank nifty is resilient and managed to sustain above the levels of 45900 on a closing basis. 

The stocks that were top gainers on the NSE as of 9.49 am were BPCL (higher by 2.91 per cent), Hindalco (2.78%), Tata Steel (2.64%), NTPC (2.55%), and Coal India (2.26%). Meanwhile, major laggards were Apollo Hospitals (-0.65%), Hero Motocorp (-0.62%), Maruti(-0.44%), Britannia (-0.39%), and Nestle India (-0.34%).

Stocks to watch

Solapur Transmission Limited (a wholly owned subsidiary of PFC Consulting Limited) established for the development of transmission system for evacuation of power from RE Projects in Solapur (1500 MW) SEZ in Maharashtra was transferred to Torrent Power Limited. Power Finance Corporation stock rallied 5.34 per cent to trade at ₹380.80. Meanwhile, Torrent Power stock inched up by 0.41 per cent at ₹1,224.95.

Wipro stock traded higher by 1.66 per cent at ₹501.70 as of 9.52 am. The company had announced the appointment of Anne-Marie (Annie) Rowland as Capco’s Chief Executive Officer. 

Zomato traded higher by 2.63 per cent at ₹169.95 on the NSE.

IIFL Finance stock has recovered from the 52-week low of ₹335.30, to currently trade at 342, up by 1.62 per cent.

RateGain Travel Technologies stock rose 2.35 per cent as of 9.58 am on the NSE to trade at ₹748.80. The company has been chosen by Brightline Trains for SaaS solutions.

Market regulator SEBI has given an undertaking in the Bombay High Court that it will not take any action against Subash Chandra for a period of three weeks.

Chandra had filed a writ petition against SEBI’s summons in a case related to alleged siphoning of funds.

Ravi Kadam, the lawyer appearing for Subhash Chandra, apprised the Court that the writ petition, inter alia, challenges the summons issued to the Chandra which is effectively a show cause notice and contains conclusive allegation.

Kadam further stated that other than the challenge to the summons, there are other challenges in as much as the details of the investigation is being leaked to the media. Kadam sought directions to restrain such media leaks.

Janak Dwarkadas, appearing for Zee, alleged that there could not be anyone other than SEBI who could have disclosed details to the media. He stated that Zee is a listed company and 96 per cent of the shareholders are public. He also stated that due to one particular news article, the shares of Zee have tanked almost 15 percent. Therefore, such media leaks are causing prejudice to these shareholders. The Court took a notice of these media leaks and observed that these leaks should not cause harm to the investors. Thus, the Court orally directed that SEBI should take due care and caution in this regard.

In the letter dated January 16, Chandra had characterised the investigation by the Securities and Exchange Board of India (SEBI) as “predetermined,” citing evidence from the order passed by the appellant court, Justice Tarun Agarwalla, Presiding Officer of the Securities Appellate Tribunal.

On August 14, 2023, SEBI had issued an order against Subhash Chandra and Punit Goenka for alleged fund diversion, and barred them from holding any key managerial positions in listed entities. SEBI mandated the completion of its investigation within eight months, setting an April deadline.