Markets to trade with positive bias in the last week of financial year

The week gone by was volatile and saw markets losing on four of the five trading sessions. At the end of the week, BSESENSEX was down 501.73 points or 0.87 per cent to close at 57,362.20 points while NSENIFTY lost 134.05 points or 0.78 per cent to close at 17,153.00 points.

While the net result looks quite small, it does not convey the volatility and uncertainty that markets witnessed. The broader markets saw BSE100, BSE200 and BSE500 lose 0.62 per cent, 0.52 per cent and 0.42 per cent respectively. BSEMIDCAP lost 0.15 per cent while BSESMALLCAP gained 0.34 per cent.

The Indian Rupee lost 40 paise or 0.53 per cent to close at Rs 76.70 to the US Dollar. Dow Jones gained 106.31 points or 0.31 per cent to close at 34,861.24 points.

The follow-on public offer to raise Rs 4,300 crore from Ruchi Soya Industries Limited is currently on. The issue priced in a band of Rs 615-650 had opened on Thursday the 24th of March 2022 and would close on Monday the 28th of March. Over the first two days of the issue, the subscription has been about 38 per cent.

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The issue has been very attractively priced and offers scope for appreciation on listing and in the medium to long term as well. The key takeaway from the RHP is the announcement from the group that the Patanjali management has taken a conscious decision to bring all food business under the Ruchi Soya brand and management. To this end, the biscuits, breakfast cereals and noodles business was transferred to Ruchi Soya from Patanjali as a slump sale in May-June of 2021 at a cost of Rs 60 crores. Going forward the remaining food business would also be transferred on similar lines. This is big news for Ruchi Soya which had revenues of Rs 17,500 crore in nine months ended December 2021 and a net profit of Rs 572 crore. Finally, its entry into the nutraceuticals business would also be a win-win situation for the company.

The company earned an EPS of Rs 23.02 for the year ended March 2021, which is Rs 11.42 in the period April to September 21 and has improved to Rs 19.33 in the nine-month period ended December 2021. The PE for the company based on March 21 earnings is 26.72- 28.24 times. The closing price of Ruchi Soya on Friday on the BSE was Rs 866.70, which is a discount of Rs 216.70 or 25 per cent to the closing price. Expect the market price post the listing of the FPO shares to converge closer to the issue price.

The Russia-Ukraine war has completed its first month. The war had begun on 24th of February and we would be entering the month of April during the course of the week. The US President in a show of strength was in Poland to meet soldiers posted on the border with Ukraine. While there has been a lot of posturing and news flow about meetings, the ground reality is that we are nowhere near an acceptable settlement. Russia has made its stance clear that it doesn't want NATO forces breathing down its neck and such guarantees need to be backed by the people who give them. How and when they would be given is the multimillion-dollar question. Till then we can hope that things do not go out of control.

The week ahead sees March futures expiring on the last trading day of the month on 31st March. Even though the month has been extremely volatile and choppy, we must remember that a short-term bottom was made in the markets in March. Incidentally, the February series had expired on the day the Russia-Ukraine war had started. The current series is ahead by 905.05 points or 5.57 per cent. The March series had begun at 16,247.95 points while the current level is 17,153 points. The bulls have a sizeable lead of a little over 900 points. With just four days to go, they would look to push the pedal and end the financial year on a high. They will be helped by some positive sentiment on account of NAV propping over the next four days as well.

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For the week ahead, the previous bottom of last week at the 57,230 level on BSESENSEX and 17,100 on NIFTY will be key support levels for the market. The possible upside for the market whether in the coming week or over a longer time frame could be 59,500-59,600 on BSESENSEX and 17,800 on NIFTY. These are very key levels and need to be breached for any meaningful breakout or breakdown. We may also see markets threatening to breakout and breakdown but faltering around these levels. One needs to keep these levels in mind before taking any positions. Further the war will be an important factor as crude oil prices after the first rally and fall, have again started rising. The demand from Russia, that they be paid in Roubles as there are sanctions against them, has found no takers amongst the beneficiaries of oil importers. However, from Russia's standpoint it becomes a valid argument as the dollars are not valid while the roubles are. Secondly, the Russian economy needs support.

Expect in the week ahead volatility to continue. Expect the week to open with a positive bias and markets to follow geo-political news flow. With March futures and year end considerations, markets would be choppy and volatile. Some NAV considerations could cause sharp movement in midcap and Smallcap stocks as well. Trade cautiously.

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

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