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Choppy week ahead

With alternate bouts of gains and losses happening, there is every possibility that the coming week could finally end in negative territory

It was a topsy-turvy last week for the markets with Monday seeing a sharp fall and Friday seeing a sharp rise. The net result of five days of sharp movements saw the markets closing marginally in the positive but not before testing important support levels twice during the previous week. The BSESENSEX at close gained 542.46 points or 0.24 per cent to close at 17,404.20 points. The NSENIFTY gained 17.35 points or 0.33 per cent to close at 5,295.55 points. The broader indices like the BSE500, BSE200 and BSE100 gained an almost identical 0.32 per cent, 0.32 per cent and 0.31 per cent respectively. The BSEMIDCAP lost a paltry 0.07 per cent while the BSESMALLCAP gained 0.05 per cent.



The sectoral indices were a mixed bag with BSEFMCG gaining 2.04 per cent and BSEAUTO gaining 1.36 per cent. BSEBANKEX lost 0.92 per cent while BSEREALTY lost 0.76 per cent. In individual stocks gold loan companies Mannapuram and Muthoot Finance were big losers after RBI tightened gold loan norms with the companies losing 16.37 per cent and 13.86 per cent respectively. BHEL lost 3.44 per cent while State Bank of India lost 3.23 per cent. Maruti Suzuki gained 3.06 per cent and Coal India was up 2.53 per cent.

Liquidity

Liquidity which has been the greatest driver for the markets so far took a pause last week and FII's who have been big buyers so far were net sellers though very marginally and sold shares worth Rs 93.35 crs. Domestic institutions were net sellers to the extent of Rs 501.72 crs. The Indian Rupee recovered marginally and closed at Rs 50.88. . On a financial year basis the BSESENSEX lost 2041.02 points or 10.5 per cent against the year beginning level of 19,445.22 points. The NSENIFTY lost 538.20 points or 9.23 per cent against a year's opening level of 5,833.75 points. The quarter which had begun very well and saw the indices gaining for seven weeks on a trot have been under correction thereafter and almost 45 per cent of the gains made in the first two months of January and February have been lost in the remaining period.

There were two IPOs which were open for subscription during the previous week. NBCC a government of India Company in the construction space was oversubscribed 4.93 times. The issue price band was Rs 90-106 and would be priced at the top end of Rs 106. The other IPO was from MT Educare which is a coaching class company predominantly based in Mumbai which issued shares in a price band of Rs 74-80 and was subscribed 4.8 times. The IPO from Olympic Card listed during the previous week and against the issue price of Rs 30 closed the week with a loss of Rs 1.35 or 4.5 per cent.

Controversy
Coal India is at the centre of controversy. The Children's fund from the UK who is the largest shareholder of the company after the government of India has sent letters to the company, its directors threatening to take action against them if they go ahead and sign the FSA(fuel supply agreement) which is a sure and certain way of committing suicide for the company. Coal India has been directed by the ministry to guarantee supply of 80 per cent of the fuel requirement of these power plants and in case they do not supply they have to make good the same through imports and at the same price. This is a test case for minority shareholders right's and based on developments of this case it is only a matter of time before the larger issue of companies like ONGC, OIL, GAIL, IOC, HPCL and BPCL would be raised. It's time the government realised that using these PSUs which are listed and have public shareholding they cannot be used as an extension of the Union Budget. They have to be seen as serving fair interest of their minority shareholders as well.

Result
Result season for the fourth quarter ending March 2012 as well as annual results for the year ended March 2012 would begin from the week ahead. They would be of interest to see how badly companies have been affected or not affected by the slowdown, cost increases and also interest rate hikes. Another important sector would be the banking sector where huge provisions would have to be made by banks for some of the large customers like Air India, GTL, Bharati Shipyard and HCC's accounts which have been restructured or are in the process of being restructured. These accounts and similar mid-size and small accounts would affect banks of all kinds whether they are PSU banks or private banks.

IVRCL and Zee are in the middle of a controversy after Zee group picked up a stake in IVRCL which is equal or slightly higher than the promoter holding. The share has seen plenty of action last week and closed at Rs 66.25 having gained Rs 7.95 or 13.64 per cent during the previous week. This counter would see a lot of action during the week ahead and could be watched and also traded. I believe that there could be a hostile takeover or coming together of both parties with either event being favourable for minority shareholders.    

The week ahead would be choppy with alternate bouts of gains and losses happening. There is every possibility that the week ahead could finally end in negative territory with Friday's gains seeing profit taking at the beginning of next week. The BSESENSEX has support at 17,193 points, then at 17,070 points, then at 16,920 points, then at 16,858 points and finally at 16,659 points. It has resistance at 17,527 points, then at 17,588 points, then at 17,691 points, then at 17,861 points and finally at 18,107 points. The NSENIFTY has support at 5,230 points, then at 5,185 points, then at 5,126 points, then at 5,076 points and finally at 5,014 points. It has resistance at 5,333 points, then at 5,356 points, then at 5,437 points, then at 5,499 and finally at 5,527 points. It's a crucial week and Friday's sharp rally would be tested for strength. Any breakdown in the same could be dangerous for the market.

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.

 

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