The week ended Friday August 17, had plenty of action as expected. Wednesday was a holiday on account of Independence Day and nothing much happened. The trading days before and after the holidays behaved differently with the markets gaining in the first period and giving up significant gains in the second period. Friday saw CAG (Comptroller and Auditor General of India) Vinod Rai pointing out favouritism of the government in allocating coal blocks, land given at concessional rates to the operator of Delhi Airport and undue favours shown in allocation of UMPP (Ultra Mega Power Project) to Reliance Power. The markets, which were up with gains of almost 7 per cent, gave up all and closed marginally positive for the day.
Win some, lose some
The BSE SENSEX gained 133.34 points or 0.76 per cent to close at 17,691.08 points. The NSE NIFTY gained 45.90 or 0.86 per cent to close at 5,366.30 points. The broader indices like the BSE100, BSE200 and BSE500 gained 0.85 per cent, 0.87 per cent and 0.87 per cent respectively. The BSE MIDCAP and BSE SMALLCAP gained 0.96 per cent and 1.00 per cent. The sectoral gainers were BSE OIL up 2.3 per cent, BSE AUTO up 1.8 per cent and BSE CAPGOODS up 1.44 per cent. The losers were BSE METAL down 1.84 per cent and BSE FMCG down 0.41 per cent. In individual stocks, the gainers were Reliance Industries up 4.22 per cent, Tata Motors up 3.64 per cent, HDFC up 3.19 per cent and Infosys up 1.64 per cent. The losers included Hindalco down 7.21 per cent, Hind Petroleum down 3.31 per cent, Bharat Petroleum down 3.15 per cent and ITC down 2.20 per cent.
The markets, since making a low on July 26, have seen the SENSEX gaining 850 points and NIFTY gaining 330 points. This is also the third consecutive weekly gain from that day. It may also be mentioned here that this is the smallest gain of the three weeks, indicating that there is a possibility of the same reversing as well. Markets are delicately poised and with another four-day-week, because of a holiday on Monday, yesterday, would follow global cues in the coming days.
Foreign investors’ role
The coal allocation row and the land allotment to Delhi airport operator GMR at a fraction of the market price will dominate proceedings in Parliament from today (Tuesday). This would have an impact on the markets and those companies in particular which are involved in these allocations. Liquidity has been a big driver for the markets and FIIs continued their buying spree with purchases of R1,085 crore while domestic institutions bought stock worth R153 crore. Amidst continuing negative news flow with one scam after another, the continued investments by foreign investors has been providing the fillip to our markets. Fresh shorts have been built up over the last week and it would be crucial to see how markets behave this time around.
Market regulator SEBI has made some changes in regulation for mutual funds, primary issues and introduced two more options for promoters to dilute their shareholding to the minimum threshold of 74 per cent. These measures are meant to help the mutual funds garner more business and investments. Issue of bonus shares and rights issue to non-promoter entities only would help promoters reduce their holding without having to raise further capital from the market. Readers would recall that Reliance Power was one such company, which had issued bonus shares to only non-promoter entities to help reduce the cost of acquisition of shares in its IPO.
Way to go
Crucial levels for the market to breakout in the coming week would be 18,000 on the SENSEX and 5,475 on NIFTY. Similar levels for a breakdown would be 17,350 and 5,250 respectively. The markets seem to have a slightly positive bias for the week but as mentioned earlier, things can change very quickly.
Trading may not yield results this week. I believe it’s time to build a portfolio of stocks, which are fundamentally strong and maybe a little ahead of time. There could be some loss if the markets remain range bound for some more time but is bound to deliver results once the markets move out of the present state. The BSE SENSEX has support at 17,608 points, then at 17,541 points, then at 17,429 points, then at 17,313 points and finally at 17,262 points. It has resistance at 17,787 points, then at 17,865 points, then at 17,966 points, then at 18,040 points and finally at 18,180 points. The NSE NIFTY has support at 5,338 points, then at 5,305 points, then at 5,270 points, and finally at 5,226 points. It has resistance at 5,396 points, then at 5,425 points, then at 5,455 points and finally at 5,498 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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