Carnage at Dalal Street

Falling crude prices are having negative effects as the markets slid on four of the five trading days, last week

The talked about forewarned correction hit Dalal Street and global markets like a hurricane and is continuing to take its toll. The markets fell on four of the five trading days and mid-week on Wednesday rose a tad to break the continuous falling trend.

Expectations are high from Raghuram Rajan with some dips in the markets. Pic/PTI
Expectations are high from Raghuram Rajan with some dips in the markets. Pic/PTI

The carnage was across the board, across sectors and stocks and it hurt the markets not only here but globally. Probably for the first time people are now talking that falling crude prices has its negative effect as well.

Falling rates
The BSESENSEX lost 1,107.42 points or 3.89 per cent to close at 27,350.68 points while Nifty lost 314.20 points or 3.68 per cent to close at 8,224.10 points. Broader markets saw BSE100, BSE200 and BSE500 lose 3.75 per cent, 3.62 per cent and 3.63 per cent respectively while BSEMIDCAP lost 3.71 per cent and BSESMALLCAP lost 3.54 per cent.

By and large all these indices lost over 3.5 per cent something which has not happened in about three year. The top sectoral and only sectoral gainer was BSEHEALTHCARE up 0.11 per cent. The smallest loser was BSEFMCG down 0.62 per cent. The losers were led by BSEOIL&GAS down 7.26 per cent closely followed by BSECAPGOOD 7.23 per cent and BSEREALTY 7.20 per cent.

In individual stocks, the top gainer was Ranbaxy up 3.99 per cent per cent followed by Sun Pharma up 2.56 per cent. Beneficiary of reduction in crude prices and various issues concerning Spice Jet, Jet Airways was yet another significant gainer up 9.82 per cent.

Losers were led by the metals pack with Tata Steel down 12.47 per cent and Sesa Sterlite down 10.82 per cent. GAIL was down 9.70 per cent while BHEL was down 9.17 per cent. Other losers included Larsen & Toubro down 7.06 per cent and Infosys down 6.33 per cent.

Dow Jones lost 677.96 points or 3.77 per cent to close at 17,280.83 points. The Indian rupee too was under pressure and slipped Rs 0.52 or 0.84 per cent to close at Rs 62.29. Founders of Infosys sold shares of Infosys of roughly Rs 6,400 crores and the bulk of the same were bought by FII’s.

Some announcements
News on the economic front in India was not happy on Friday when retail or consumer inflation and IIP or industrial growth numbers were announced. While consumer inflation at 4.2 per cent for November 2014 was the lowest since the new series began in January 2012, against 5.52 per cent in October 14 and 11.16 per cent in November 13, IIP at negative 4.2 per cent was indeed disappointing.

The demand for a rate cut to prevent the economy from slipping into recession will now increase and demand a rate cut be done as early as possible to stop the economy from slipping into recession. Whether it will happen or not is a million dollar question which could be answered only by RBI Governor Raghuram Rajan.

The coal bill was passed in parliament and this would allow the government to float the tendering process of e-auction of coal blocks which were cancelled. Election results from the two states of Jammu and Kashmir and Jharkhand where elections are currently would also be announced in the coming weeks.

Oily situation
The world would take a break from markets post this week and even during the same normally volumes start reducing but this time around the same has not happened simply because of the fact that markets have suddenly become so volatile on account of crude oil.

There is concern now that countries which are major oil producers are also contributors of capital or investors of equity markets. This investment may not come in these difficult times and is therefore impacting capital markets.

The correction which is currently on is more than welcome. The open interest for December futures had risen 13 per cent to Rs 82,310 crores when the series began. This is a huge number and showed how optimistic people had begun to be.

With this correction things will cool off and also all those who were waiting on the sidelines for the market to correct will get an opportunity to buy. Nothing is lost or nothing has changed.

The week beginning from today will be volatile and put markets under pressure. The opportunity to buy is there but there would be some pain still left. Invest with a medium term horizon in fundamentally solid companies and buy into sharp dips which will be there in the coming week.

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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