The recently concluded domestic follow-on offer of ICICI Bank Ltd attracted close to Rs1 trillion against an issue size of about Rs9,000 crore

by Rachna Monga - HT Mint

Big Bull Rakesh Jhunjhunwala is raising concerns about the short-term direction of the Indian stock market. Addressing an audience of about 200 brokers here on Tuesday, Jhunjhunwala said, “I am circumspect and rather careful about the market for the next six months.” He says he is concerned about the way Indian initial public offerings (IPOs) are getting huge subscriptions not only in India, but globally.

Jhunjhunwala was talking at the launch of India’s Leading Equity Broking Houses 2007, a publication of Dun & Bradstreet, a business information providing firm. The recently concluded domestic follow-on offer of ICICI Bank Ltd attracted close to Rs1 trillion against an issue size of about Rs9,000 crore.

In mid-June, New Delhi-based realty firm DLF Ltd’s Rs9,500 crore IPO was subscribed three-and-a-half times. Dozens more IPOs, including those in real estate, are on the cards. In early 2005, when India’s benchmark stock market index Sensex was hovering around 6,000 point levels, Jhunjhunwala surprised investors by predicting that it will go up to 25,000 by 2009. Two years since that prediction, the benchmark index has been hovering around 14,500 levels. It reached its lifetime high of 14,723.88 on 9 February.

Over the past month, the 30-stock Sensex has risen marginally from 14,397 points to close at 14,43.06 on Wednesday. The broad-based 50-stock S&P CNX Nifty has risen from 4,256 levels to 4,263 during this time. Despite being cautious in the near-term, Jhunjhunwala’s speech had its usual bullish undertone as well.

“It’s not that the market is going to fall from a cliff tomorrow. After an year from now, we will once again enter a long-term bull phase.” Jhunjhunwala, who runs Rare Enterprises, an investment firm here, says he’s surprised that many investors who come to him tend to focus on the negative aspect of the Indian growth story.

Ramesh Damani, a member of the Bombay Stock Exchange and a well-known markets commentator, is also worried about the money being thrown in the recent IPOs. “I think it’s time to get scared,” he said. “After four years of strong double-digit returns, we are likely to see consolidation in this year. Sensex could be seen in the range of 12,500-15,000,” he added. However, Damani still thinks that there are stocks available at great valuations and investors just need to focus on picking individual stocks instead of chasing the market movements. Manish Chokhani, director and CEO, Enam Securities Ltd, foresees the market entering into a consolidation phase in the next six months. “In last two weeks, three Indian companies have raised around $9 billion from domestic and global markets,” he noted. “This shows the huge appetite of investors for Indian papers. But the secondary markets still haven’t taken off in a big way.” However, not all market pundits who have huge investor followers are bearish in the near term.

For instance, Raamdeo Agrawal, managing director, Motilal Oswal Securities, is comfortable with the current state of markets and he doesn’tsee any dangers in the nearfuture. “There is a clear distinction between performers and non-performers,” he said.

“Sectors which have not performed well have been decimated or severely punished by investors. But the ones which have performed well have been more than adequately rewarded,” Agrawal added.