Confused at the Close

The week gone by saw the markets falling and rising on alternate days. Markets fell on Monday, Wednesday and Friday while they rose on Tuesday and Thursday. The markets closed weak and confused with the BSE SENSEX losing 263.28 points or 1.39 per cent to close at 18,675.18 points. The NSE NIFTY lost 70.90 points or 1.23 per cent to close at 5,676.05 points. The broader indices like the BSE500, BSE200 and BSE100 lost less at 0.90 per cent, 0.95 per cent and 1.11 per cent respectively. The BSE MIDCAP was almost neutral losing a mere 0.03 per cent while the BSE SMALLCAP lost 0.50 per cent.

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The best performing sector was BSE FMCG up 1.95 per cent and BSE METAL up 0.13 per cent. The losers were led by BSE REALTY down 4.10 per cent, BSE OIL down 3.49 per cent, BSE IT down 3.08 per cent and BSE AUTO down 2.08 per cent. In individual stocks, the top gainer was J&K Bank up 11.07 per cent, Power Finance up 5.81 per cent, JSW Steel up 3.79% and Tata Steel up 2.49 per cent. The losers included BHEL down 6.76 per cent, Wipro down 5.93 per cent, Hindalco down 5.76 per cent, Infosys down 5.22 per cent, and LIC Housing Finance down 5.09 per cent.

FIIs continued to be buyers and their net purchases were Rs 3,195 crore while domestic institutions were net sellers of Rs 1,225 crore. Last week, had its fair share of news with the government divestment of RINL (Rashtriya Ispat) getting postponed once again. The issue was the Coal Ministry wanted a minimum price equivalent to the book value while merchant bankers were offering less. Peer group leader SAIL (Steel Authority) is quoting at a rough discount of 11 per cent to its book value.

Considering the lacklustre performance of the steel sector it would be difficult to visualise the prospects improving in the near future. Prices of urea have been raised by Rs 50 per ton, which is cosmetic in nature.

The government also announced a pilot project to reimburse subsidy amounts direct to farmers. Though the step is welcome, it is quite some time before this would be the order of the day.

A non-bailable warrant has been issued against Vijay Mallya for bouncing of cheques worth Rs 10.5 crore of Kingfisher Airlines. This appears to be yet another problem for the beleaguered airline. Infosys declared its results for the July-September quarter, which was more or less on expected lines. The net profit at Rs 2,369 crore was up 24.3 per cent. The share lost Rs 135 or 5.33 per cent, post the results. Its weekly loss was similar at Rs 132 or 5.22 per cent. What spooked the market were the drop in margins by 160 basis points and the flat guidance given for the remaining quarters.

The week also saw IIP numbers for August being declared which were better than expected and also show that probably the economy has bottomed out. This is a good sign and one hopes that these trends continue. Inflation for September has also reduced compared to August and gives hope that there could be a CRR cut when RBI meets for its review on October 30. In other results, those of HDFC Bank and Indusind Bank were on expected results and they have shown consistent growth. Shares of HDFC Bank gained 1.3 per cent for the week while those of Indusind Bank fell 1.2 per cent.

The government is grappling with a number of issues. These include inflation, policy paralysis, stigma of corruption amongst its functionaries and bureaucracy, a stagnating economy, depreciating rupee and above all, elections due in less than 18 months. There is only that much that can be achieved when they chose to do nothing in the first three years of their term.

The week ahead would be driven by results from individual companies. The FII inflow is substantial and would be enough to prevent any major fall in the market. On the flip side as long as domestic institutions are sellers there would not be a runaway rise either. Markets in the coming week are likely to trade higher at the beginning, but would lose ground on selling pressure or results as the week goes by. The week would end flat to negative and there would be a negative bias for the week. Key area of support would be 18,575 and 5,625 while key resistance would be 18,950 and 5,750.

The BSE SENSEX has support at 18,594 points, then at 18,514 points, then at 18,388 points and finally at 18,127 points. It has resistance at 18,800 points, then at 18,902 points, then at 19,006 points and finally at 19,145 points. The NSE NIFTY has support at 5,648 points, then at 5,614 points, then at 5,582 points and finally at 5,525 points. It has resistance at 5,714 points, then at 5,739 points, then at 5,779 points and finally at 5,825 points. By and large a range bound lacklustre week with a negative bias coming up.

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 published in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so.. 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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