Hold on to your seats

Expect super volatility for a while but don’t press any panic buttons

Markets fell on three of the five trading days last week. They were under pressure. While the low made on February 12, is still some distance away, it continues to be under threat. The BSESENSEX lost 554.85 points or 2.34 per cent to end at 23,154.30 points. NIFTY lost 181 points or 2.51 per cent to end at 7,029.75 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 2.40 per cent, 2.44 per cent and 2.50 per cent respectively. BSEMIDCAP lost 2.35 per cent while BSESMALLCAP lost 3.25 per cent.

Union Finance Minister Arun Jaitley poses for a photo with Chartered Accountants visiting Parliament in New Delhi on Friday. PIC/PTI
Union Finance Minister Arun Jaitley poses for a photo with Chartered Accountants visiting Parliament in New Delhi on Friday. PIC/PTI

In sectoral indices, there were no gainers while the one to lose the least was BSEOIL&GAS down 1.16 per cent. The losers were led by BSEPOWER down 4.25 per cent, followed by BSEBANKEX 3.85 per cent, BSEAUTO 3.70 per cent and BSECAPGOODS 2.96 per cent. In individual stocks, the gainers were led by Hind Unilever up 3.03 per cent followed by ONGC 1.82 per cent and Power Finance 1.70 per cent. The losers were led by the auto stocks with Bajaj Auto down 8.96 per cent, HeroMoto 5.47 per cent and Maruti Suzuki 4.80 per cent. Other heavyweight losers included ICICI Bank 6.90 per cent, SBI 5.10 per cent, TCS 4.55 per cent and ITC 4.54 per cent. The government sold shares of NTPC through an offer for sale (OFS) and garnered close to R 5,000 crore. The retail portion which was to be bid for on the second day remained undersubscribed and unbid portion was added back to the non-retail bucket. The floor price was Rs 122 with a 5 per cent discount to retail. The share recovered from the low of R 116.80 to close at R 121.35, a weekly loss of R 8.15 or 6.29 per cent.

Workers dismantle an old railway coach sold off at an auction at a railway station in Allahabad on the day Railways Minister Suresh Prabhu unveiled the annual Railways Budget in Parliament. Pic/AFP
Workers dismantle an old railway coach sold off at an auction at a railway station in Allahabad on the day Railways Minister Suresh Prabhu unveiled the annual Railways Budget in Parliament. Pic/AFP

The Dow Jones gained 247.98 points or 1.51 per cent to close at 16,639.97 points. The Indian Rupee continued to be under pressure and lost R 0.17 or 0.25 per cent to close at R 68.45 to the US Dollar. Thursday saw the February series expire with bears having the market in their full control. The series expired at 6,970.60 points, a series loss of 451.85 points or 6.09 per cent.

Mallya and beyond
Diageo has announced a severance package for Dr Vijay Mallya in lieu of his stepping down from the board of United Spirits. The deal would involve a payment of roughly R 500 crore over five years for the non-compete agreement. Two issues have been raised post this settlement, where a management alleges foul play and then pays this kind of severance. If the allegations are correct, Diageo should either deduct the money and bring it to United Spirits, or, increase the amount of compensation to Mallya and make good this amount to United Spirits as well. Secondly, the lenders to Mallya’s group of companies want to lay their hands on this money to part compensate for the dues. The progress of this case which is unique in India’s corporate history, will be closely tracked.

The Railway budget was presented and there were no changes in either the passenger fares or freight rates. The railway minister has agreed to review the freight structure to make it more competitive against road transport and increase its market share. The minister has also announced new projects, which entail an expenditure of R 1.5 lakh crore, and would be partly financed by LIC. I believe using the surplus liquidity from LIC is a great idea, simply because it puts less pressure on the banking system for other financial needs and ensures LIC a steady long term return on its investments.

Not much was said about Mumbai specifically, except the elevated railway project which would again be given a push. The bigger problem in India is encroachment and then litigation which delays projects. The courts need to play an active role in speedy clearances of projects and removing obstacles to encroachment, to make development timely and meaningful.

Take it on
The Economic Survey presented on Friday, talks of a GDP growth rate of 7 per cent and higher. It believes that these are challenging times but we can still do well as a nation. There are some innovative ideas suggested in the document but one is not sure how much would figure in the Finance Minister Arun Jaitley’s speech today. The one thing that was worrying the markets over the last fortnight, about changes in the way Long Term Capital Gains was taxed, seems completely unlikely post the survey. A reduction in corporate tax with a matching reduction of exemptions, and, the roadmap of how tax would, in the next three years be cut by five per cent in totality, is on the cards.

Today and tomorrow of course are super volatile days on account of the budget and subsequent clarity on any issues thereafter. I believe that the FM has little choice this time, considering the state of the economy.
An impetus to push spending through infrastructure is imminent. This would generate jobs, kick start demand in core sectors like steel and cement and have a multiplier effect on economy. Keep your fingers crossed, hope for the best and most important, don’t panic until the entire budget is completed. More on the budget and what is means to us as citizens and market players on Tuesday.

Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.

Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.

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