‘Carpe diem’ seems to be the motto of investors. But what is amusing is shares of banks and financial institutions have showed equal, if not more, interest than retail participants in primary market in the recent past. The fact is, they have nearly doubled their investments in IPOs and we are only half way through the year! So far in 2021, their investments in primary issues have touched a four-year high.
The story does not end here. PFRDA is mulling over allowing pension funds to broaden their investment gamut to invest in eligible IPOs and similar primary issues with certain predefined criteria. This certainly showed the IPO party is far from over, at a time when the economy is flushed with liquidity and the ‘mother’ of all IPOs is yet to come.
Given the large investments in new aged unicorns and interest in IPOs, it seems India may soon be moving towards a private market platform, just like Nasdaq Private Market in the US, which is the platform for trading of pre-IPO shares and transactions of private company shares. Now this market in the US requires investors to meet certain wealth criteria. Hence, it might take a while before this idea appeals to the masses of our country, who currently transact pre-IPO shares in the grey market. But there is no doubt we are moving in that direction.
Event of the Week
As the Q1 earnings are under way, some leading financial companies reported a dent in their performance due to a rise in bad assets and provisions. What investors should take note of is if leaders of the banking and NBFC space haven’t been spared from the impact of the Covid second wave, then the weaker, smaller players will definitely have a tough time coming out stronger on the other side. These developments were results of the moratorium period being lifted.
Unless a third wave surfaces, the largecap pack at least may not face significant pain. A third wave can at the most delay their growth, but it will certainly not derail them completely. Hence, investors should target only the fundamentally stronger companies from the financial space on corrections.
Technical Outlook
Nifty50 closed the week in the red. However, it is still trading in the consolidation range. It remained quite volatile through this whole week and tested the crucial support at 15,650 level to bounce quickly. Bank Nifty also found cushion at 34,300 level. Market breadth is showing bullish signs, but trading volumes are drying up. Many European and emerging market indices are underperforming or have made a lower bottom recently. The outlook remains bullish as long as we trade above 15,600 level. Any break below the said support will signal weakness in the short term.
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Expectations for the Week
IPOs will continue to be the highlight of the market in the coming week with two new issues lined up to hit the Street. Bank Nifty may remain in focus as private banks come out with their quarterly numbers. The FOMC is expected to meet in the US and all eyes will be on their borrowing plan and guidance on interest rates moving forward.
Indian bourses will take account of all these factors and deliver whipsaws on news. Traders should be extremely calculative in their moves, while investors should sit tight on their quality portfolio. Nifty50 closed the week at 15,856, down 0.42%.
