The markets continued on an extended Diwali mode and now looks to greet the New Year with some new milestones. The standout space was mid-caps and small caps where some strong resurgence was seen which brought cheer to the larger section of the market which was nursing the wounds of the meltdown since 2018.
BIG PLAYERS ACTIVITIES
The FII s were on a buying spree over the week. DII’s were keen on booking profits.
Will the mid-caps and small caps take over?
Since the attention seems to be on the midcap and small caps, focus is on some of them to examine possibilities in the coming weeks:
- RVNL – This PSU went public 3 years back but was languishing at sub 20 levels. There has been a strong resurgence in interest with volumes rising sharply and not without reason! The company appears reasonably valued at 24 and recently declared dividend of 11%. Performance has also been good with an EPS of Rs 4 and with railways on a revamp mode, better times are ahead!
- Route Mobile – This company went public a couple of months back. However the telecom boom seems to have triggered a fancy for the stock. The company operates in 3 business verticals:
- Enterprise: It provides a cloud-communication platform as a service to enterprises
- Mobile Operator: Services in this segment include SMS analytics, firewall, filtering, monetization, and hubbing solutions.
- Business Process Outsourcing (BPO): A range of BPO services including client support, technical support, booking, and collection services to some of the world’s largest organisations
- Chemcon Speciality Chemicals – Another company which went public recently. 60% of its revenue is derived from pharma chemicals. The company has plans to increase capacity by 60% which would result in economies of scale. The company also manufactures HMDS and CMIC which has extensive use in all pharma companies.
- PSU Banks – This segment has seen some serious wealth erosion amongst investors. The Govt has pumped in Rs 3 lac crore on recapitalization of these banks. Though synergies are expected on consolidation of the space with mergers, the Govt might find it difficult to sustain the funds infusion. The recommendations of the P. J. Naik working Committee might finally be taken seriously where it had suggested getting a strategic partner be allowed to take controlling stakes in these banks. With the current market price abysmally low compared to book values, these banks have attracted attention.
Couple of private banks also need to be mentioned like Karnataka Bank and Karur Vysya Bank where the majority shares are spread across retail. The NPA phase in the banking sector in the last few years seems to have scared possible raiders into these banks! Else they are looking attractive
WHAT DOES THE COMING WEEK HOLD ?
- Power stocks have seen some serious buying in the last few weeks and age old laggards like Adani Power and Tata Power have found wings. Tata Power got LOI from Orissa power regulator for distribution and retail supply of electricity in Orissa’s five circles. This will raise the consumer base from 5.7 million to 10 million. The proposal to privatise discoms by the Power Ministry is clearing the path for recouping losses.
- Metal stocks have been on a stellar run and good news continues as the metal prices have been surging to multi year highs and the market is clearly discounting the earnings surge in the coming quarters. Interestingly couple of metal stocks namely NMDC and Vedanta have dwarfed the buyback price.
- The Nifty and Bank Nifty could some consolidation as levels of 13500-13700 get digested. As the market enters the penultimate week of the year, the FII activity normally ebbs down. A dash towards 14000 on the Nifty looks on cards towards the New Year! Let’s wait and watch!
Happy Investing!
Did you know?
Bitcoin is back! The popular digital currency, which is arguably one of the most polarizing in financial markets, is approaching heights not seen since the frenzied rush into cryptocurrencies three years ago. Such coins backed by governments or corporate groups also have conferred the air of legitimacy of the digital-currency sector, with the Federal Reserve exploring the possibility of issuing its own digital currency, amid reports that China is moving forward with a digital yuan. The second-largest economy in the world launched a trial of a digital currency last month.
Some stray thoughts
The pandemic has set a different norm of doing business. IT, financial services, broking, are some which have realized the value of work from home. While it is still debatable whether this affects efficiency, the fact that this has been forced upon us has set us thinking. The new norm may see lot of office space getting freed up. While accessing a fertilizer corporate site, there was an advertisement on availability of fully furnished centrally air conditioned ready to move office space most suitable for IT enabled services, back office work, call centres, etc. This could be a precursor of things to come. In the coming months business centres might be the norm where meetings could be fixed with all amenities and ambience available which would be more than what a customer would have bargained for! Thus a mix of work from home and office could be a way we would accept happily!