Election expectation

With polls in the financial powerhouse states of Maharashtra and Haryana in the week, get set for volatility at Dalal Street

The markets were super volatile last week. Of the four trading sessions we saw movements of 300 point or thereabouts on the Sensex on three days. Similar movement on the Nifty saw the markets move by about 100 points. Clearly, this was indicating that the market was responding to news with greater movement than necessary.

Security is high at Mantralaya in Mumbai as poll day nears. Pic/Sayed Sameer Abedi
Security is high at Mantralaya in Mumbai as poll day nears. Pic/Sayed Sameer Abedi

The BSESENSEX closed with losses of 270.61 points or 1.02 per cent at 26,297.38 points while the Nifty lost 85.60 points or 1.08 per cent to close at 7,859.95 points. The broader market saw the BSE100 lose 1.00 per cent, BSE200 1.09 per cent and BSE500 1.05 per cent. The BSEMIDCAP lost 0.70 per cent while the BSESMALLCAP lost 0.29 per cent.

Overall performance
In the sectoral indices, the top gainer was BSEPOWER up 2.02 per cent followed by BSEOIL&GAS 1.81 per cent and BSEREALTY 1.33 per cent. The losers were led by BSEHEALTHCARE down 4.17 per cent followed by BSEMETAL own 3.79 per cent and BSEFMCG 2.44 per cent. Readers would recall that these sectors had registered sharp gains last week.

In individual stock, the gainers were led by BHEL up 10.62 per cent and followed by Union Bank 5.38 per cent and Hind Petro 4.07 per cent. The losers were led by NMDC down 8.89 per cent followed by Jindal Steel 8.80 per cent and Sesa Sterlite 7.72 per cent. IT major Wipro lost 5.04 per cent.

Friday saw Infosys declare its quarterly result which saw net profit rise to R 3,096 crores a year on year rise of 28.6 per cent. This was way above estimates and saw the share rise 6.65 per cent post the results. The company announced a special interim dividend of R 30 per share and a bonus issue of one share for each share held.

It however had risen before time and the weekly rise was just 1.09 per cent indicating that the rise last week was premature. In other news, August industrial production grew a mere 0.4 per cent against 0.5 per cent in July. This slower growth could pose some issues for GDP with the first two months of the July-September quarter having grown slowly.

Market movers
Dow Jones lost sharply and had a weak closing on Friday. Dow lost 465.59 points or 2.73 per cent to close at 16,544.10 points. FIIs continued their selling and sold shares worth Rs 1,935 crores while domestic institutions bought an identical Rs 1,937 crores. The positive news for India is the fact that crude prices have been falling and are now below the $ 90 level a more than two year low.

Mangalore Chemicals’ competing offer from Deepak Fertilisers and Zuari Agro would come to an end the last week with the offer closing on Friday, October 17. While the bid price is Rs 93.60 from Deepak Fertilisers it is a mere Rs 81.60 from Zuari Fertilisers. Shareholders of Mangalore Chemicals must sell their shares in the company and exit as the price offered is very high due to competitive bidding and is way above fair value.

The way of selling could be through open market or tender offer as per the individual’s tax planning needs, but investors must sell. In case you wish to sell the shares in the open market, it should be done by Tuesday as that would be the last day that one could buy and tender shares with Wednesday being a trading holiday. Share prices would tend to soften on Thursday.

Election effect
The market has a midweek holiday on Wednesday, October 15 for elections in Maharashtra and Haryana. This would break the trading momentum. Exit poll to be telecast post voting on Wednesday evening could provide a much needed trigger for the markets when they resume trading on Thursday morning. If trends indicate that there could be a clear mandate for one party like in the Lok Sabha, we could see a sharp rally, failing which markets would remain under pressure.

Markets have been slipping and losing ground albeit slowly over the last three weeks. The driver for the markets would be global cues, results from individual companies and possibly election outcome in the coming weeks. Volatility will continue in the market and investors would be well advised to remain cautious and allow the market to play itself. Refrain from making hasty decisions as they are likely to hurt. 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.

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