Focus on Friday

Friday seems to be a special day for the markets and there is always some news or event, which moves the market significantly. Friday, April 20, we had these two trades, which caught the market by surprise. Infosys futures traded at Rs 1,950 against the current price of Rs 2,400. Of course, the price recovered and it hardly affected the day’s trade. In the afternoon, NIFTY futures, which were trading around 5,330 saw trades being executed at a level of 5,000 and unlike Infosys, which recovered completely, here the recovery was substantial but not total. Markets were confused as to what happened but the trade was computer driven or ‘algorithmic’ trade. The matching of the trade was a split second late and hence there were freak trades, which happened, but enough to trigger stop losses and create panic. The question is: if this is what has happened in a matter of a split second difference; imagine what could happen if there is a gap of a couple of seconds or two persons trying to match a trade in the same NIFTY at the same time?

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RBI announcing an unexpected repo rate cut of 50 basis points brought life to the market and saw a huge rally of 263 points on the SENSEX and 82 points on the NIFTY, in the first two days of last week. Last week closed with gains all round and the BSE SENSEX gained 279.33 points or 1.63 per cent to close at 17,373.84 points. The NSE NIFTY gained 83.40 points or 1.60 per cent to close at 5,290.85 points. The broader indices like the BSE500, BSE200 and BSE100 gained 1.31 per cent, 1.35 per cent and 1.38 per cent respectively while the BSE MIDCAP gained 1.26 per cent and the BSE SMALLCAP gained 1.49 per cent.

Amongst the other indices were the BSE AUTO which gained 5.88 per cent, BSE METAL 3.33 per cent and BSE FMCG up 2.98 per cent. On the losing side, was BSE OIL, which was down 0.47 per cent. In individual stocks, Tata Motors gained 9.55 per cent, Heromotocop was up 6.32 per cent, while Maruti Suzuki gained 5.14 per cent, Coal India up 7.34 per cent and Tata Steel up 4.59 per cent. BHEL lost 4.72 per cent, while IVRCL, which is witnessing a takeover battle, lost 15.13 per cent, after it said it would not increase its stake further.

FIIs bought shares worth Rs 368 crore, while domestic institutions bought stock worth Rs 391 crore during last week. The Indian Rupee depreciated further to Rs 52.10 to the US Dollar. Results have begun and index heavyweight Reliance Industries declared results for the quarter and the year. The company reported revenues of Rs 3397.92 billion, which rose 31 per cent, but net profit declined 1 per cent, to Rs 200.40 billion. For the fourth quarter, the turnover was flat at Rs 878.33 billion and the net profit lower by 5 per cent at Rs 42.36 billion. Other income has almost doubled this year to Rs 61.92 billion against Rs 30.52 billion. The share is under pressure and has closed at Rs 731, a weekly loss of 2.66 per cent.

The week that began sees an IPO from Tribhovandas Bhimji Zaveri (TBZ) looking to raise Rs 200-210 crore in a price band of Rs 120-126. On a fully diluted basis, the issue is being offered at a price earnings multiple of 11.93-12.52 times which is certainly not cheap. Gitanjali Gems, which has a turnover roughly nine times that of TBZ is available at a little less than half the PE multiple compared to TBZ. The objects of the issue are to fund the expansion of 43 stores over the next three years compared to the 14 stores presently. Looking at the limited experience in execution, this looks like a tall order and may not happen in the time frame indicated. Secondly, the funding of initial inventory of the new stores would require bank loans to be taken to the extent of roughly Rs 400-500 crore, which could be a drag on the profits and performance of the company. The brand is strong but the issue price is extremely expensive and the IPO should be avoided. The week will see plenty of action and without doubt will be volatile. Thursday, April 26, will see the expiry of the April series of futures and the previous month’s expiry was at 5,178.85, which is a good 112 points lower than the current level. Results and overseas cues will determine the course of the market.

It appears that the market would trade in a range of 17,000-17,600 on the SENSEX and 5,175-5,375 on the NIFTY. The BSE SENSEX has support at 17,230 points, then at 17,079 points, then at 16,941 points, then at 16,828 points and finally at 16,559 points. It has resistance at 17,518 points, then at 17,599 points, then at 17,687 points, then at 17,807 points and finally at 17,995 points. The NSENIFTY has support at 5,245 points, then at 5,202 points, then at 5,154 points, then at 5,076 points and finally at 5,043 points. It has resistance at 5,336 points, then at 5,361 points, then at 5,426 points, then at 5,499 points and finally at 5,519 points. 

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