The previous week was unstable with inflation refusing to ease, and the depreciating rupee not helping
The markets continued to be extremely volatile and fell for the last two days into the July series expiry and also traded week on the opening day of the August series. The BSESENSEX lost 401.66 points or 1.99 per cent to close at 19,748.19 points. The NIFTY lost 143 points or 2.37 per cent to close at 5,886.20 points. The broader indices like the BSE100, BSE200 and BSE500 lost more at 2.55 per cent, 2.68 per cent and 2.73 per cent respectively. The BSEMIDCAP lost 3.57 per cent while the BSESMALLCAP lost 3.33 per cent. The top gainer amongst sectoral indices was BSEIT, which gained 2.03 per cent. The only other gainer was BSETECK up 1.76 per cent. The losers included BSECAPGOODS down 10.16 per cent, BSEMETAL down 6.68 per cent, BSEBANKEX down 4.73 per cent and BSEPSU down 4.15 per cent.
In individual stocks, the biggest gainer was Hero Motocop up 5.25 per cent. Others included Sun Pharma up 3.52 per cent, Bajaj Auto up 3.06 per cent and Hind Petro up 2.65 per cent. The losers included Gitanjali Gems, down 22.53 per cent. The stock price has fallen from R 600 levels to R 85.10 and the stock is locked down circuit every single day. Larsen & Toubro was a big loser after poor results and was down 13.23 per cent. Banks stocks were weak led by Canara Bank down 15.62 per cent, Union Bank down 14.74 per cent, Yes Bank down 13.54 per cent and Axis Bank down 7.05 per cent. Other losers included Hindalco, Tata Steel, Sterlite and BHEL.
FIIs were small sellers last week, with sales of Rs 510 crore in equities and Rs 884 crore in debt. The total sales in July in equities, so far is Rs 7,500 crore and Rs 11,830 crore in debt. Domestic institutions were sellers of Rs 790 crore in equities during last week and R 1,300 crore for the month. What is disturbing is that, domestic institutions have turned net sellers in the debt segment for the first time, in a very long time. They were net sellers of Rs 2,366 crore in the month so far, while they have sold aggressively in the last six days with net sales exceeding Rs 24,000 crore. It may be mentioned that there is a huge redemption faced by liquid funds, as returns have turned negative in recent times. It, therefore, becomes very crucial for the Reserve Bank to ensure that the rupee, and consequently the bond yield become stable in the immediate term. The Indian rupee closed stronger at Rs 59.04, gaining Rs 0.31 or 0.52 per cent.
On Tuesday the July 30, RBI will be announcing its mid quarter review. A couple of weeks ago, everybody was expecting a rate cut, but, with the rupee depreciating and bond yields going for a toss, there is no such expectation. The policy would keep rates unchanged. The key, however, is to note the tone of the Governor, and look for cues whether he hints of any impending CRR hikes in the near term. Inflation just refuses to ease and with the GDP and IIP not helping. It appears that all the policy action is confined to the RBI.
Results from FMCG major, Hindustan Unilever, were below expectations with revenue growths at a mere seven per cent, which is their lowest in the last three years. ITC too had similar growth issues but part of it was due to cigarette business suffering from cost increases and delays in price hikes. The banking sector seems to be in bad shape with the quality of assets taking a beating. PSU banks like Union Bank, PNB and Canara Bank were at the receiving end and lost substantial ground. Private Banks like Yes Bank, Axis Bank, HDFC Bank and ICICI Bank were also at the receiving end. Asset issues are being raised in the private banks as well. It will be crucial to see how ICICI bank has fared on this front when it declares its quarterly results. The BSEBANKEX lost a significant 4.73 per cent last week.
The week may see some bounce at the beginning, only because we have fallen sharply in the last three days. Expect a technical bounce before the markets take cues from RBI and then results from ICICI Bank. Key levels for the SENSEX are 19,555 and 19,975 while they are 5,805 and 5,975 for the NIFTY. The support for the SENSEX is at 19,662, then at 19,514 points, then at 19,380 points, then at 19,237 points and finally at 19,147 points. It has resistance at 19,870 points, then at 20,078 points, then at 20,166 points, then at 20,249 points and finally at 20,351 points. The NIFTY has support at 5,855 points, then at 5,806 points, then at 5,755 points, then at 5,699 points and finally at 5,635 points. It has resistance at 5,930 points, then at 6,005 points, then at 6,029 points, then at 6,093 points and finally at 6,153 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
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