The four-day short trading week was more eventful and volatile than necessary. After gaining steadily on Monday and Wednesday (markets were closed on Tuesday on occasion of Gandhi Jayanti), we had a sharp rise on Thursday on expectations of the cabinet meeting taking crucial decisions for further reforms. This would be the last set of reforms to be announced for the time being as the Assembly election dates for Himachal Pradesh and Gujarat were announced. The former will go to the polls on November 4 while the latter will have a two-phased polling session on December 13 and 17. Policy action can only take place after December 20 when poll results of these states will be declared.
The government announced higher FDI in pension and insurance sectors and also introduced the company’s bill and amendments to the Forward Contracts. The amendment would allow options in commodities and this introduction saw the only listed commodity exchange MCX gain R51.70 or 4.03 per cent to close at R1,335.85. While the markets rallied in expectation, they failed to sustain the movement after the announcement of these reforms that are different from FDI in retail. The SENSEX gained 175.72 points or 0.94 per cent to close at 18,938.46 points. NIFTY gained 43.65 points or 0.77 per cent to close at 5,746.95 points. The broader indices like the BSE500, BSE200 and BSE100 gained 1.01 per cent, 1.01 per cent and 1.03 per cent respectively. BSE MIDCAP gained 1.08 per cent while BSE SMALLCAP gained 1.82 per cent. The top sectoral gainer was BSE REALTY up 5.55 per cent. Other gainers included BSE CAP up 3.49 per cent, BSE FMCG 2.4 per cent and BSE OIL up 2.2 per cent. Losers included BSE HEALTH down 1.35 per cent and BSE IT down 0.20 per cent. In individual stocks, BHEL gained 6.6 per cent, Tata Motors gained 4.82 per cent, SBI 4.51 per cent and the two PSU power financial institutions REC and PFC up 4 per cent. The losers included LIC Housing Finance down 4.06 per cent, Hero Motocorp down 3.62 per cent and HDFC down 2.98 per cent. Carlyle on Friday sold its residual stake of 3.7 per cent or 5.7 crore shares at roughly R4,340 crore. The selling of this stake put pressure on the stock price.
Friday also saw the NSE trading system coming under pressure and failing. There were erroneous orders worth R650 crorepunched by a trader at a brokerage house. The circuit filter should have kicked in at a value of 570 points or 10 per cent but failed to do so and allowed the NIFTY to hit a low of 4,888.20 points which was a fall of just about 900 points compared to the previous day’s close. This circuit was past the 15 per cent fall mark. The exchange maintained that there was no system glitch and orders in the system needed to be executed before the exchange closed down. The explanation is most ludicrous as every trading day, the exchange shuts at 3.30 pm even though there are orders pending. Very clearly the exchange systems need to be overhauled and SEBI, who has ordered an enquiry, needs to remedy this situation.
Last week, the markets saw FIIs buying stock worth Rs 6,371 crore while domestic institutions sold shares worth Rs 924.10 crore. The Indian Rupee continued to appreciate and closed at Rs 51.84 against Rs 52.84 in the previous week.
In the week ahead, it appears that the biggest driver would now be the results of the July-September quarter. Infosys and HDFC Bank will announce their quarterly results on Friday and the markets would keenly watch these results unfold. With election code of conduct having kicked in, the performance of companies and FII activity would be major drivers for the market. The SENSEX has gained closed to 3,500 points or a little over 22 per cent in the current calendar year so far. Valuations of companies are no longer cheap or attractive and results for the quarter need to justify the rich valuations they enjoy. The Finance Minister was in Mumbai over the weekend and interacted with RBI, SEBI, stock exchange officials and a select group of FIIs. His meeting with FIIs could be an interesting one and market movement in the current week would indicate what transpired at the same meeting.
Crucial levels to watch out for would be 19,135 on the upside and 18,725 on the downside. Similar levels on the NIFTY would be 5,825 on the upside and 5,705 on the downside. BSE SENSEX has support at 18,745 points, then at 18,552 points, then at 18,361 points and finally at 18,292 points. It has resistance at 19,135 points, then at 19,255 points, then at 19,388 points and finally at 19,575 points. The NSE NIFTY has support at 5,690 points, then at 5,638 points, then at 5,535 points and finally at 5,465 points. It has resistance at 5,815 points, then at 5,875 points, then at 5,906 points and finally at 5,944 points. Interesting week ahead where results would be the focus and trend decider.
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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