Battered and bruised

The Indian rupee fell to a new low, compared to other currencies

The last week hit global markets quite severely and India fared worse than the rest, as in our case, the currency also got battered. The India rupee closed the week at Rs 49.43 and made a 28-month low in the process. The BSE SENSEX lost 771.77 points or 4.56 per cent to close at 16,162.06 points. The NSE NIFTY lost 216.50 points or 4.26 per cent to close at 4,867.75 points. In just the last two days, the BSE SENSEX has lost 900 points and is now down over 20 per cent for the year so far, making it one of the worst performing markets. The Dow Jones in comparison has lost less than 8 per cent and the recent crisis is because the US Fed decided on maintaining a status quo while the world felt that there would be quantitative easing.

CURRENCY CONUNDRUM: The rupee is down, down, down
illustration/Jishu Dev Malakar

The broader indices also fell in line with the benchmark indices and the BSE500, BSE200 and BSE100 lost 3.64 per cent, 3.84 per cent and 3.90 per cent. The BSE MIDCAP lost 2.62 per cent while BSE SMALLCAP lost 2.38 per cent. The fall was widespread and almost all sectors were at the receiving end. In individual stocks, State Bank held steady and actually gained Rs 10 or 0.51 per cent, to close at Rs 1,956 while the BSE BANKEX lost 3.30 per cent. ONGC which was a gainer last week, when the FPO was deferred at the last moment was back to where it all began, losing Rs 16.90 or 6.15 per cent to close at Rs 257.80. Other losers included Hero Honda down 7.45 per cent, Sesa Goa down 7.30 per cent and index heavyweight Reliance Industries down 6.77 per cent at Rs 771.

Bonds issued by Muthoot Finance listed on Tuesday, September 20 and as expected were trading at a discount. The coupon rate was 12.25 per cent for retail applicants. The number of bond issues which have come in recent times have not done as well as expected, simply because people have not understood the issues and have been misled into assuming that these issues would also have a listing gain. This listing gain was not possible and led to disappointment and also withdrawal of applications in a big manner in the case of Muthoot.

The IPO market has suddenly become very active and there were two issues, which opened and closed last week. The issues have received just about adequate response from 'friendly' intermediaries and closed with overall subscription levels of 2.21 in the case of Prakash Constrowell and 1.5 times in the case of RDB Rasayans Limited. These issues and probably another half a dozen which are likely to open in the coming week, are all using the September 30 deadline of the IPO opening, as they have given numbers only up to March 2011. Almost all of these issues are expensive, have poor fundamentals and are overpriced.  

In the last two days of the week, when the markets fell by 900 points, Foreign Institutional Investors sold shares worth over Rs 2,600 crore, even as domestic Institutions bought some of it. At the same time, the rupee also fell sharply and the fall in the markets looked steeper. The crisis facing world markets is yet to be resolved and though markets may take a breather this week, it would be fair to assume that the worst is far from over at this time. Commodity prices have also become vulnerable and last week one saw silver prices lose a staggering 11 per cent in a single day on Friday. Copper prices have also crashed quite sharply and are now at a 13-month low. It is widely believed that with global economies expected to slow down, commodity prices could take a beating going forward and the overall open interest could reduce. A fall in commodity prices would also have an effect on stock prices.

Coming to the week beginning Monday, September 26, there is likely to be some gains and then losses and one should expect the market to end flat to neutral with a small negative bias. Thursday, September 29 would see the expiry of September futures and there should not be much movement on that count as the current level of the market is almost at the same level as the August expiry. The BSE SENSEX has support at 16,020 points, then at 15,842 points, then at 15,705 points and finally at 15,525 points. It has resistance at 16,336 points, then at 16,528 points, then at 16,652 points and finally at 16,884 points. The NSE NIFTY has support at 4,821 points, then at 4,742 points, then at 4,742 points, then at 4,770 points and finally at 4,655 points. It has resistance at 4,922 points, then at 5,022 points, then at 5,080 points, then at 5,123 points and finally at 5,166 points.

The week will be much quieter than what we saw last week and the action could be limited to the IPOs that are scheduled in the week. We will also see the listing of shares of PG Electroplast today and the bond issue from Religare Finvest during the course of the week. The banking sector is looking attractive simply because it has been hammered out of shape and may be bought on declines. Use any dips in the market to enter the space.

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

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.

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