The uptrend has just begun

The  Indian market gained for the third consecutive week and is seem to be on an up-move but for any knee-jerk reaction to the firing of missiles in Syria. The Sensex gained 565.68 points, or 1.65 per cent, to close at 34,192.65 points while the Nifty gained 149 points, or 1.42 per cent, to close at 10,480.60 points. The broader markets gained with the BSE 100, BSE 200 and BSE 500 going up 1.21 per cent, 1.17 per cent and 1.08 per cent, respectively. The Dow Jones gained 427.39 points, or 1.75 per cent, to close at 24,360.14 points. While Dow futures fell post-market closing on Friday evening they are back to zero on Sunday.

In the primary market news, the shares of Lemon Tree Hotels listed on Monday, April 9, and had a great debut, gaining over 27 per cent. The shares were issued at Rs 56 and had received institutional support but were undersubscribed both in HNI and Retail categories. The share closed at Rs 71.60, a gain of Rs 15.60, or 27.86 per cent. The share lost some ground during the week and closed at Rs 67.65, still up 20.80 per cent.

There was no other news from the primary market other than the Lemon Tree debut. It appears the market conditions have unnerved merchant bankers and promoters alike.

IT major Infosys has declared results for the quarter and the year ended March 2018. Its net profit for the year was at Rs 16,029 crore against Rs 14,353 crore in the previous year. This includes a write back of Rs 1,432 crore on account of a tax provision made in the US, on which it received an advance ruling. The EPS for the year was Rs 71 against Rs 62.77 in the previous year. The write back resulted in an EPS accretion of Rs 5.88 for the year. The company had also done a buyback during the year, which resulted in reduction of equity, and hence, higher earnings. The company has guided for revenue growth of 6 to 8 per cent for next year. It is important to note that the company has decided to sell Kallidus, Skava and Panaya. Panaya was a controversial acquisition during Vishal Sikka’s regime. Infosys results are average and one needs to see higher growth in the coming years if the company has to regain its lost aura.

ICICI Bank and Axis Bank continued to hog the limelight and gained ground as well. While Shikha Sharma would be stepping down by the end of the calendar year, the case is not certain about Chanda Kochhar. The interrogation of her brother-in-law and her husband has been on for quite some time and answers are not very clear. In such circumstances what prompted the independent directors on the board to give her a clean chit would remain a mystery. One hopes that the directors who are supposed to remain the custodians of minority shareholder interests are not found wanting. Also, if a class action suit is filed in the US, a similar action would be allowed for Indian shareholders as well.

On a more positive note, the recently listed ICICI Securities, a subsidiary of ICICI Bank, posted impressive results. The EPS of the company has improved from Rs 10.48 to Rs 17.18. This of course, does not tell the whole story as the company had reported an EPS of Rs 12.46 for the nine months period ended December 2017. The shares which were issued at Rs 520 and fell to a low of Rs 400 have rebounded to close at Rs 422.65. There could be some more improvement in prices in the coming days.

The market uptrend is likely to continue considering the improvement in sentiment and expected results. While Syria and the unfolding trade war could act as pinpricks, neither country can take serious action in the current conditions. The worry for India would always be rising crude prices and this could act as a double whammy because any major hit on crude would always be accompanied by a depreciating rupee. Keep your longs going and use any knee-jerk reactions to add to fundamentally solid companies. The uptrend has just begun.

(The author is founder, Kejriwal Research and Investment Services)

Columnist: 
Arun Kejriwal