The bearish island reversal pattern formed on April 4 behaved as expected. The markets reacted on expected lines. The correction seemed to be over somewhere between Wednesday and Thursday and there was a smart recovery. Things seemed to be going along well even though Infosys announced poor results, which were declared before trading began last Friday when the markets were in positive territory till 1.30pm. Thereafter Infosys again started tanking and led the rest of the market down as well. Call it the Infosys factor or Friday the 13th factor, Infosys lost Rs 346.75 on a single day which contributed to 202 points on the SENSEX fall. All in all, the weekly loss on Infosys was Rs 447 or 15.68 per cent. The company has reported lower turnover compared to the December 11 quarter. The revenue is lower in rupee terms by 4.8 per cent at Rs 8,852 crore and in dollar terms lower by 1.9 per cent at $1,771 million. The company has also said that it would not increase salaries of its employees and this affected the company and the sector. The whole market was affected by mid-afternoon and we had a huge fall of 238 points by the end of the day. The intraday difference between the high and the low was 368 points previous week.
The BSESENSEX lost 391.51 points or 2.24 per cent to close at 17.094.51 points. The NSENIFTY lost 115.45 points or 2.17 per cent to close at 5,207.45 points. The broader indices like the BSE100, BSE200 and BSE500 lost similarly with losses of 2.12 per cent, 2.20 per cent and 2.12 per cent. The BSEMIDCAP lost 2.10 per cent while the BSESMALLCAP lost a mere 0.67 per cent. In sectoral indices the BSEFMCG was the big gainer up 3.6 per cent while BSEAUTO gained 0.91 per cent. BSEBANKEX was a small loser down 0.34 per cent. The big loser was BSEIT down 11.5 per cent at 5,404.27 points. BSECAP lost 4.43 per cent. In individual stocks FMCG majors Hind Unilever gained 6.14 per cent while ITC gained 3.98 per cent. Tata Motors gained 3.94 per cent while SBI was up 2.17 per cent. Mirroring the fall of Infosys, TCS lost 9.23 per cent, Hindalco lost 6.35 per cent and BHEL lost 5.59 per cent.
The other big fall during the previous week was in Indraprastha Gas, where the Petroleum & Natural Gas Regulatory Board reduced its margins significantly. The network tariff has been reduced 63 per cent from Rs 104.05 to Rs 38.58 per mmbtu, while compression charges have been reduced 59 per cent from Rs 6.66 per kg to Rs 2.75. This has been done with retrospective effect from April 1, 2008. The impact of this would be about Rs 1500 crore for a company which had revenues of Rs 1,450 crore for nine months ended December 2011 and a net profit of Rs 193 crore. The share price lost Rs 147.50 or 39.57 per cent during the previous week.
The Indian Rupee depreciated marginally to Rs 51.30. Last week, FIIs were net sellers and this happened for the first time in the calendar year 2012. Their net sale was Rs 1,342 crore while domestic institutions sold stock worth Rs 824 crore. IIPs were announced and the January figures have been revised downwards from 6.8 per cent to 1.1 per cent. The Finance Minister was shocked seeing this revision and I believe the department, which churns out these statistics, has also been affected by the ‘retrospective’ effect currently prevalent in the company. NBCC which had issued shares at Rs 106 listed during the previous week and closed at Rs 94.75, a loss of Rs 11.25 or 10.61 per cent. The other company to list was MT Educare, which had issued shares at Rs 80 and closed with gains of Rs 14.85 or 18.56 per cent. With these two issues, there have been four IPOs in the calendar year 2012 so far. One expects this number to improve significantly with SEBI insisting that companies will not be given extension to comply with minimum public shareholding of 25 per cent ending in June 13 for private companies and August 13 for PSU companies. Roughly Rs 40,000 crore of face value needs to be raised to correct the shortfall in public shareholding.
The week ahead would see inflation numbers being announced on Monday and the RBI credit policy meet on Tuesday. There is wild speculation on what will be the outcome of this meeting, but a lot would depend on inflation numbers as the fiscal deficit continues to be under strain with the government unwilling to do anything on the subsidies reduction front. At best a token change in rates may be done. The BSESENSEX has support at 16,955 points, then at 16,788 points, then at 16,659 points and finally at 16,564 points. It has resistance at 17,319 points, then at 17,690 points, then at 17,325 points and finally at 17,778 points. The NSENIFTY has support at 5,159 points then at 5,125 points, then at 5,038 points and finally at 5,005 points. It has resistance at 5,281 points, then at 5,328 points, then at 5,378 points and finally at 5,412 points. The markets will be choppy, but event driven this week. However, I believe that the markets are likely to end neutral or flat at the end of the 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 http://ak57.in
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