Bashing the benchmark

There were no cheerful faces last week as indices fell about 4.5 per cent

The markets continued to get bashed and we had probably the worst weekly fall in many years last week. The benchmark indices fell about 4.5 per cent. Virtually no market or sector was spared in this present fall. It impacted subscription in the primary markets as well and there were no cheerful faces seen anywhere around Dalal Street.

The Sensex was a sea of crimson as falls were seen all over in the last week. Pic/PTI
The Sensex was a sea of crimson as falls were seen all over in the last week. Pic/PTI

Sensex lost 1,190.48 points or 4.51 per cent to close at 25,201.90 points. Nifty lost 346.90 points or 4.34 per cent to close at 7,655.05 points. The broader market saw BSE100, BSE200 and BSE500 lose 4.29 per cent, 4.11 per cent and 4.03 per cent respectively.

The US Bureau of Labour Statistics report shows that the economy created just 173,000 new jobs last month, but the brighter side is that the unemployment rate dipped to the lowest since April 2008
The US Bureau of Labour Statistics report shows that the economy created just 173,000 new jobs last month, but the brighter side is that the unemployment rate dipped to the lowest since April 2008

Losses all around
BSEMIDCAP lost 3.71 per cent whilst BSESMALLCAP lost 3.53 per cent. In sectoral gainers, there were none but the best performing was BSEIT down 1.95 per cent. In losers, the worst performing was BSEPOWER down 7.15 per cent, followed by BSEBANKEX 6.42 per cent, BSEAUTO 5.67 per cent and BSEPSU 5.63 per cent.

Global stock markets are on edge this week as China seeks to use data investors to find clues about slowing growth in their economy. Pics/AFPGlobal stock markets are on edge this week as China seeks to use data investors to find clues about slowing growth in their economy. Pics/AFP

In individual stocks, the top gainer was Cairn India up 0.96 per cent followed by DLF 1.35 per cent. The losers were led by BHEL down 11.91 per cent followed by Union Bank 10.40 per cent, Mahindra & Mahindra 9.9 per cent, Hindalco 9.66 per cent and ICICI Bank 9.06 per cent.

Dow Jones closed at 16,102.38 points, a weekly loss of 183.26 points or 1.11 per cent. The Indian rupee lost 32 paisa or 0.48 per cent to close at Rs 66.46. FII’s were big sellers and sold shares worth Rs 4,385 crores during the last week and sales of Rs 17,250 crores in August. Domestic institutions were buyers of equity of Rs 3,650 crores during the last week and Rs 10,550 crores in August.

US fall
Job data on which the world was betting came in before markets opened and US markets tumbled thereafter. The US economy added 1.73 lakh jobs in August but this was below expectation of 2.1 lakh jobs. Unemployment was at 5.1 per cent which is the lowest in seven years.

The way FED would go when they meet on September 15 and 16 about raising interest rates becomes that much more confusing and too close to call than ever before. The decision taken here would have a big bearing on global markets as well.

The primary markets have seen five back to back issues and one issue listing in the last two weeks. The performance of the same has been pathetic on almost all counts. The day when markets tanked on Monday, August 24 the government raised Rs 9,300 crores from the offer for sale of Indian Oil.

Floor price
The floor price was R387 and after a cumulative loss of 7.91 per cent on the Sensex and 7.77 per cent on Nifty in the fortnight, IOC is actually up at Rs 407.50 against the floor price of Rs 387. The same cannot be said of the private issues in the primary market.

The first was Navkar Corporation which was over hyped and the HNI portion was not even subscribed when in the previous week it was expected to be subscribed by the leveraged HNI over 200 times. The second issue from Pennar Engineered Products did not get adequate response from retail investors.

The third issue from Shree Pushkar Chemicals was fully subscribed. The fourth issue from Sadbhav Infra Projects received good support and was more than fully subscribed. The final issue was from Prabhat Dairy which had to revise the price downwards and extend the issue because of inadequate response and then also was not fully subscribed.

The issue would be subscribed after reducing the offer for sale portion. The point which clearly emerges from these six issues is that the government offer for sale was the best of the lot as investors are making money even today after an almost 8 per cent fall in prices.

These five issues by and large had to struggle when markets fell because they were priced very aggressively. The one issue which listed Power Mech Engineers is trading at a discount currently even though the issue was subscribed 133 times by the leveraged investor HNI and 38 times overall.

The issue closed with losses of over 8 per cent on the day of listing. The cost of leverage of Rs 112 did the investor and the issue disservice and a good issue became a poor performing one. One can easily say, the leveraged HNI has the capacity to overhype an issue and in bad times his interest can kill the good issue. Why have HNI distorting demand?

Yesterday
Monday markets opened positive but slipped into the red after some time itself. They kept on slipping and things then fell after the meteorological department confirmed that the monsoons so far have been below normal and are about 75 per cent.

So besides, all the worries that we have, this is one more added to the list and could mean serious trouble for the realty sector in Mumbai. Markets will continue to be driven by extreme volatility in the immediate term. We are not yet out of the woods.

The US Fed meeting, events in China, Greece elections and what happens in India would be some of the factors that one should keep an eye on in this week. Fundamentals have not changed but sentiment has and that takes some time to change again. Look for opportunities to buy but don't be in a hurry to do so.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.

Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

Highlights
>> Dow Jones closed at 16,102.38 points, a weekly loss of 183.26 points or 1.11 per cent.
>> Sensex lost 1,190.48 points or 4.51 per cent to close at 25,201.90 points.
>> Nifty lost 346.90 points or 4.34 per cent to close at 7,655.05 points.

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