Caution: Bumps ahead

The markets opened strong after the holiday on Monday, but failed to gain further thereafter. At the end of the week the BSE SENSEX closed with gains of 92.13 points or 0.52 per cent at 17,783.21 points. The NSE NIFTY gained 20.40 points or 0.38 per cent to close at 5,386.70 points. The broader indices like the BSE100, BSE200 and BSE500 gained much less at 0.29 per cent, 0.18 per cent and 0.13 per cent respectively. The BSE MIDCAP and BSE SMALLCAP were losers and closed down 0.63 per cent and 0.61 per cent respectively. The sectoral indices were a mixed bag with some gainers and some losers. The gainers included BSE IT up 3.31 per cent, BSE FMCG up 1.83 per cent and BSE METAL up 0.92 per cent. The losers included BSE REALTY down 2.59 per cent, BSE OIL down 1.21 per cent and BSE CAP down 1.19 per cent.

An appeal: (left to right) Coal Minister Sriprakash Jaiswal, Finance Minister P Chidambaram and Law Minister Salman Khurshid address a joint press conference in which Chidambaram urged the opposition to “allow parliament to function” and break a deadlock over coalgate. Pics/AFP

In individual stocks Infosys gained 4.00 per cent, BPCL gained 3.99 per cent, TCS 3.57 per cent and Wipro up 3.21 per cent. The losers included PFC down 8.62 per cent, Bharti Airtel down 5.38 per cent, Reliance 4.05 per cent and REC down 3.96 per cent. This was the fourth consecutive week of gains but they seem to be slowing down and the breadth was missing this time. FIIs continued their buying spree and bought shares worth R958.76 crore while domestic institutions turned net sellers at Rs 474.08 crore. The Indian Rupee appreciated marginally and closed at R 55.50.

Coin-ed: A money exchange vendor in Karachi sets up his stall. Even as the Indian Rupee appreciated marginally to R55.50, the Pakistani Rupee fell to an all-time low as the nation prepared to return USD 400 million to the International Monetary Fund

In events last week there were quite a few. A very disturbing event happened where at the AGM of Cairn India, the management of the company, the Agarwals, employed bouncers at the venue inside the hall. This is an unheard of thing and they were asked to leave the venue by shareholders. The management of a company has a right to have security outside the entrance of the venue not inside. One hopes that this does not become a practice and shareholders are not intimidated by such bouncers.

The CMD of SBI Mr Chaudhuri has asked that RBI should stop the practice of collecting CRR. This amount is a percentage of the total deposits of a bank and is held by RBI without earning interest making the cost of lending that much more. The erstwhile governor of RBI, Y V Reddy, had abolished the interest that was paid by RBI to banks. If this interest is restored or CRR abolished, it would benefit banks and help them earn better profits. RBI pays dividends to the Government of India and they are wholly owned by the government, while in the case of PSU banks, the average holding in banks would be around the 55 per cent level. It would then be a case of sharing dividends with the pubic in the case of banks and 100 per cent in the case of RBI. This issue is not over as yet.

Effect of parliament
The other issue which rocked parliament and hampered its functioning was the allocation of coal blocks issue. The government, in trying to defend itself, has come out with a ludicrous statement that if coal has not been mined, there is no loss. The logic is ridiculous simply because if coal blocks have been allocated during 2006-2009 and have not been mined as yet, why were these blocks allocated in the same place? Resumption of parliament and how this issue is handled will be a key factor for markets which are looking tired and need new drivers for further momentum.

Possible correction
The markets have risen for the last four weeks consecutively but very clearly look tired. One would need a lot of good news to keep the momentum going failing which we should be ready for some amount of correction in the coming week which would have five trading sessions after two consecutive weeks of shortened trading. The crucial levels to watch out for would be 18,000 on the SENSEX and 5,450 on the NIFTY. These levels would need to be crossed and sustained for the momentum to continue. On the downside the levels would be 17,650 and 5,350 respectively.

The BSE SENSEX has support at 17,731 points, then at 17,634 points, then at 17,510 points and finally at 17,400 points. It has resistance at 17,828 points, then at 17,935 points, then at 18,075 points and finally at 18,202 points. The NSE NIFTY has support at 5,372 points, then at 5,344 points, then at 5,310 points and finally at 5,274 points. It has resistance at 5,400 points, then at 5,432 points, then at 5,478 points and finally at 5,513 points.

We have a tough trading week ahead of us. Trade cautiously.

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.

India, China to discuss trade deficit
The ninth session of the India-China Joint Economic Group, to be conducted today, will see Commerce Minister Anand Sharma and his Chinese counterpart Chan Deming discuss market access for IT companies and agriculture products from India in the Chinese market, as well as the matter of widening trade deficit between the two countries. Other subjects that Sharma is expected to raise are the export of pharmaceutical products, gems, seafood, Indian films and investment-related issues. Meanwhile, Deming is expected to talk about strengthening cooperation in trade remedies and service trade. He will also meet industry leaders today. In 2011-12, the bilateral trade between the countries stood at USD 75.45 billion.

Invest in capital market: Sebi
Capital market regulator Sebi’s Chairman U K Sinha asked the residents of Bihar to think about investing in capital markets, during a seminar in Patna. He said there are several government pension schemes available that offer safe and healthy returns. He also said that in the entire state of Bihar, there is only one registered share broker and only 1,000 terminals of share market. Only two companies located in Bihar are listed on the bourses, he added. Sebi, with the intention of reviving the mutual fund industry, had announced a whole host of financial and operational benefits and requested fund houses to approach residents of small cities for investments. Yesterday, it recommended to the Central government that tax benefits should be provided to those who invest in mutual funds.

Indian Bank to open 1,525 branches
With the aim of offering banking services to rural areas, Indian Bank has announced that it will open 1,525 branches in villages. However, these branches won’t be as big as the existing ones. Titled Ultra Small branches, these units will have one clerk, one laptop and one Rural Development Officer, said Indian Bank Chairman and Managing Director T M Bashin. This is in addition to the 1,965 branches the bank currently has all over the country. Bashin revealed that rural branches are a viable proposition and the business in a few of his branches in Tamil Nadu has crossed R50 crore.
— Agencies

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