The appointment of a new Reserve Bank of India (RBI) Governor may be a move to show who calls the shots
Last week, the markets broke the falling trend of the eight consecutive sessions by rallying strongly on Monday, but managed to close only marginally up. Tuesday saw a big fall indicating weakness in the markets. Thursday saw a rally signalling a short term bounce in the coming days. The BSESENSEX lost 374.68 points or 1.96 per cent to close at 18,789.34 points.
The NIFTY lost 112.25 points or 1.98 per cent to close at 5,565.65 points. The broader indices like the BSE100, BSE200 and BSE500 lost less at 1.52 per cent, 1.49 per cent and 1.39 per cent respectively. The BSEMIDCAP lost a mere 0.37 per cent while the BSESMALLCAP gained 1.09 per cent. The top gainer amongst sectoral indices was BSEMETAL which gained 5.31 per cent. The other gainers were BSEOIL&GAS up 3.3.8 per cent and BSEREALTY up 2.97 per cent. The losers were led by BSECAPGOODS down 6.11 per cent. Other losers included BSECON down 4.79 per cent, BSEFMCG down 2.29 per cent and BSEHEALTH down 2.12 per cent.
In individual stocks, the biggest gainer was Ranbaxy up 31.53 per cent. Beleaguered Financial Technologies the promoter of crisis ridden and now shut down NSEL gained 17.82 per cent. Others included Power Finance up 17.53 per cent, Jindal Steel and Power up 10.97 per cent and Tata Steel up 7.98 per cent. MMTC which has been falling from R 200 levels to below R 40 gained 21.22 per cent to close at R 46.85. The biggest loser was BHEL down 21.32 per cent after it declared disastrous results. Other losers included MCX down 27.90 per cent, Wockhardt down 9.97 per cent and Gitanjali Gems down 6.86 per cent amongst the regular losers. Bajaj Auto, HDFC and Sun Pharma lost 6.53 per cent, 7.8 per cent and 8.64 per cent respectively.
Raghuram Rajan has been appointed the new Reserve Bank of India (RBI) Governor and would take over from the present incumbent on September 5. In a move which smacks of showing who calls the shots, he has been appointed as Officer on Special Duty with immediate effect. One feels that this move is not necessarily in the best interests of the country and may appear to be impropriety. The Indian Rupee has been under severe pressure and closed at R 60.88, a gain of R 0.22 for last week. On Wednesday, last week, it had slipped quite badly and was almost at the 62 level. To tighten liquidity, RBI has announced that it would sell R 22,000 crore of government bonds every Monday. This would keep liquidity under a tight check and hopefully prevent the Rupee from slipping.
FIIs were small sellers in the four day week of R 140 crore in equity and big sellers in debt of R 4,688 crore. The debt selling seems to have resumed with the Rupee breaching new levels. Domestic institutions bought equities of R 321 crore during the week.
The Companies Bill has been finally passed and there will be substantive changes and a more comprehensive bill, which would happen after 57 years. One must remember that India would celebrate its 66th Independence Day on Thursday, August 15. Retail investors would certainly welcome the class action suits, which are now permitted under the new act. Foreign investors were able to file a similar suit as in the case of erstwhile Satyam, while Indian Shareholders were unable to do so. The bill also has provisions for Corporate Social Responsibility (CSR), and funds based on profits have to be compulsory spent on such activities. Public Fixed Deposits (FDs) may only be raised after obtaining credit rating, which would make it difficult for companies with a poor track record to access the market.
This week, has a trading holiday on Thursday on account of Independence Day. It would be fair to assume that any uptrend in the week would see position unwinding on Wednesday. Traders would prefer to sit on the side-lines of an extended weekend, with many people taking Friday as an extra holiday, and having a four day vacation.
The Dow Jones suffered losses as trade data was better than expected and increased fears that the bond buying may stop or taper off at the end of the current quarter. In the coming few weeks and months, until this even actually happens, it will keep the US markets and therefore global markets on tenterhooks.
This week will see some recovery at the beginning, on account of the Companies Bill being passed, and also by the fact that markets are now looking technically oversold and fundamentally attractive. Some select buying is warranted. The rally however would be corrective in nature as ground reality, and key economic indicators do not support any medium term up move. Key levels for the SENSEX are 18,550 and 19,200 while they are 5,485 and 5,740 for the NIFTY. The support for the SENSEX is at 18,664, then at 18,545 points, then at 18,457 points, then at 18,325 points and finally at 18,175 points. It has resistance at 18,871 points, then at 19,079 points, then at 19,213 points, then at 19,306 points and finally at 19,435 points. The NIFTY has support at 5,524 points, then at 5,486 points, then at 5,424 points, then at 5,366 points and finally at 5,309 points. It has resistance at 5,592 points, then at 5,654 points, then at 5,704 points, then at 5,775 points and finally at 5,852 points.
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.