Street Signs: Buy the dip, microfinance sector seen turning a corner & more

Plenty of steam left: Buy the dip

The benchmark Nifty logged record closing highs last week, surpassing its previous all-time high made over 13 months ago. Notwithstanding a sharp upmove in the markets over the past two months, there seems to be more steam left. Analysts are recommending a ‘buy the dip’ strategy as long as key support levels are not breached. “The immediate short-term support for the Nifty is placed between 18,400 and 18,350, while 18,170 will be seen as medium-term support, where the 20-day exponential moving average is placed. On the flip side, the immediate resistance for the Nifty may be seen around 18,635, followed by the 18,700-18,800 band,” says Ruchit Jain, lead research analyst, 5Paisa. The Nifty last closed at 18,513.

Grey market premium of Dharmaj, Uniparts tops 20%

The grey market premium (GMP) for the two initial public offerings (IPO) that hit the market this week is in excess of 20 per cent, observe market players. Shares of Uniparts India are commanding a GMP of 23 per cent, while those of Dharmaj Crop Guard are at 27 per cent. Dharmaj, an agrochemical company, is looking to raise Rs 216 crore in fresh capital through its IPO. “If we annualise its four months of 2022-23 (FY23) earnings per share (EPS) of Rs 7.44, then on the annualised FY23 EPS of Rs 22.32, the issue is available at a price-to-earnings (P/E) of 10.62x, which, compared to peers, is cheap. According to the prospectus, the valuation looks attractive, considering the industry-average P/E of 24.04x,” reads a note by KRChoksey Research. These two IPOs will cap a busy month for IPOs.

Microfinance sector seen turning a corner

Microfinance stocks are likely to benefit from a rise in credit demand. According to analysts, the microfinance industry has captured only 28.5 per cent of the total addressable market. The unmet credit demand is likely to touch Rs 17 trillion by 2025-26 (FY26). This implies a 17 per cent compound annual growth rate in the industry’s assets under management over 2021-22 through FY26. Although the past decade for microfinance institutions (MFIs) has been challenging, the resiliency and support they received from regulators and customers was encouraging, view analysts. Moreover, a separate regulation for microfinance lending and an established MFI-specific credit bureau has made the Indian microfinance industry more ring-fenced than its global peers.