Even the rate cut announced by the RBI and investments made by FIIs could not ensure the markets closed at a high last week; much change is not expected this week either
RBI Governor Dr D Subbarao cut CRR and Repo rates by 25 basis points. Though the markets made new 52-week highs post the announcement, they were unable to hold on to their gains and closed in negative territory.
The expiry of January futures on Thursday, January 31, and the beginning of a new month on Friday, February 1, failed to enthuse the markets and they lost ground on both days. The SENSEX lost 322.34 points or 1.60 per cent to close at 19,781.19 points. The NIFTY lost 75.75 points or 1.25 per cent to close at 5,998.90 points. The broader market lost with the BSE100, BSE200 and BSE500 losing 0.92 per cent, 0.81 per cent and 0.77 per cent respectively. The BSEMIDCAP and BSESMALLCAP were a mixed bag with losses of a mere 0.10 per cent and 1.21 per cent.
The BSEFMCG was the biggest gainer up 1.68 per cent. Other gainers included BSEREALTY up 1.33 per cent and BSEHEALTH up 1.10 per cent. The losers included BSECAP down 2.94 per cent, BSEOIL down 1.69 per cent and BSEAUTO down 1.67 per cent. In individual stocks, Axis Bank was up 8.96 per cent, J&K Bank 7.46 per cent, Coal India 4.26 per cent, Titan Industries 4.23 per cent and Indian Oil up 4.11 per cent.
The losers were led by Bharti Airtel down 8.09 per cent, Tata Motors down 5.33 per cent, Larsen down 4.48 per cent and Canara Bank down 3.77 per cent. Some of the controversial stocks that have been losing ground continuously include Arshiya International down 13.95 per cent and Deccan Chronicle down 13.99 per cent. Arshiya has fallen from a level of R132 on January 2 to a mere R33.30 in just one month. The stock has been hitting lower circuits almost every single day. Deccan Chronicle now trades only on the BSE and the price is R4.12 against a price of R57 on February 17, 2012.
Oil India on Friday completed its offer for sale for 6.01 crore shares. The floor price of the offer was R510 and the issue has been oversubscribed 2.5 times at an indicative price of just under R520. The issue has garnered R3,100 crore for the government. The success of this issue would see the next offering being from NTPC in about 10 days’ time. The January futures expired on Thursday with gains of 2.8 per cent.
FIIs continued to be big buyers investing R4,871 crore for the week. In the first month of the calendar year, they have invested 4.1 billion dollars or R22,200 crore. Domestic institutions were sellers for the week of R3,150 crore. During the month of January, they have sold shares worth R4,750 crore while state insurance companies like LIC have sold shares worth R13,000 crore. The Indian Rupee strengthened to 53.19.
Around the world
The Finance Minister completed his roadshow in Hong Kong, Singapore, London and Frankfurt and assured investors that he does not intend to make the forthcoming budget populist. He has also assured them that the fiscal deficit and the current account deficit would be controlled. The country would have a stable tax regime. These assurances have reflected in two things: the sovereign downgrade has been deferred and the huge inflows have had a positive impact on the rupee. Meanwhile, the Dow Jones index closed above the 14K mark, a level last seen in October 2007.
The week ahead
Garment retailer V-Mart is looking to sell 45 lakh shares in a price band of R195-215 and has issued an IPO. The company had revenues of R282 crore in the year ended March, 2012 and R250 crore in the eight month period ended November, 2012. Net profits in the same period were R11 crore and R13 crore respectively.
The company has lower operating costs because it operates in Tier2 and Tier3 towns primarily; however its net margins are nothing great to talk about and are similar to other retailers. Shares are being offered at a price earnings multiple of 17.85-19.69 times on a fully diluted eight months’annualised earnings of R10.92. The issue is steeply priced and does not leave anything significant for the investor. Readers would do well to give the issue, which closes today (February 5), a skip.
This week, the markets are likely to recover some of the lost ground but nothing more than that. The BSESENSEX has support at 19,689 points, then at 19,596 points, then at 19,459 points and finally at 19,335 points. It has resistance at 19,919 points, then at 20,077 points, then at 20,205 points and finally at 20,443 points. The NSENIFTY has support at 5,965 points, then at 5,916 points, then at 5,868 points and finally at 5,822 points. It has resistance at 6,040 points, then at 6,082 points, then at 6,139 points and finally at 6,198 points. 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 http://ak57.in
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