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Mixed fortunes continue

A number of factors like tensions around the world, RBI policy review and current economic conditions were responsible for the see-saw at Dalal Street

The last week started on a strong note and notched up gains in the first two days. Thereafter, it surrendered all of it to close on a negative note. Geo-political considerations with tension and conflicts currently on in three different places i.e. in Gaza, Iraq and Ukraine were responsible for the sell-off.

Last week, Raghuram Rajan announced new RBI policies. Pic/Bipin Kokate
Last week, Raghuram Rajan announced new RBI policies. Pic/Bipin Kokate

Going down
The BSESENSEX ended with losses of 151.70 points or 0.60 per cent to close at 25,329.14 points while Nifty lost 34.05 points or 0.45 per cent to close at 7,568.55 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.59 per cent, 0.61 per cent and 0.67 per cent respectively.

BSEMIDCAP lost 1.67 per cent and BSESMALLCAP lost 0.63 per cent. The top sectoral gainers were BSECONDUR up 2.88 per cent followed by BSEIT 1.42 per cent and BSEAUTO 1.40 per cent. The losers were led by BSEMETAL down 2.49 per cent followed by BSEBANKEX 2.45 per cent and BSEREALTY 1.85 per cent.

In individual stocks the gainers were led by Mahindra & Mahindra up 4.86 per cent followed by Titan 4.88 per cent and Infosys 4.19 per cent. The losers were led by PNB (Punjab National Bank) down 5.45 per cent followed by Sesa Sterlite 5.04 per cent, Axis Bank 4.19 per cent and Bank of Baroda down 4.03 per cent.

While global cues affected the markets, Dow Jones managed to close in positive territory gaining 60.56 points or 0.36 per cent to close at 16,553.93 points. FII’s were buyers of equity worth Rs 2,217 crores while domestic institutions chipped in with purchases of Rs 1,417 crores. The Indian Rupee remained virtually unchanged closing at R 61.14 against the preceding week's close of Rs 61.18.

System exposed
The doubt over their being underhand dealing in PSU banks was never disputed but it was never talked about openly. With the Syndicate Bank CMD being arrested and also the Vice Chairman of Bhushan Steel amongst other persons the rut in the system is being exposed.

The company reported consolidated sales of under Rs 9,700 crores for the year ended March 2014 and has a borrowing of about Rs 40,000 crores. This simply put, means that for every rupee of loan the company generates a mere quarter of sales. It sure is disgusting and shows that the amount loaned is not being used for business purposes.

The share price of Bhushan Steel has been rightly hammered and fell over 44 per cent to close at R 219.35. The share price at the beginning of the month was at Rs 395. Accountability of tax payer’s money by the PSU banking system has to be made more stringent and one just cannot have money being squandered to a few corporates and then mass loan waiver being done by politicians.

Review results
RBI in its policy review meet kept interest rates unchanged but cut SLR by 50 basis points to 22 per cent and thereby injected R 40,000 crores of liquidity into the system. RBI governor’s statement that the GDP growth of 5.5 per cent is achievable boosted market sentiment but media reports of his interview saying that world markets could crash dampened sentiment. Ultimately, it was global cues and the attack on Iraq that saw the Indian market fall.

Reporting season for results of the quarter ended June 2014 now enters its final week and results so far indicate that things have certainly bottomed out. Performance of corporates has shown that they have weathered the storm and with some turnaround, change in investment climate and sentiment, results would be far better going forward.

Markets have been choppy and have given decent returns having at peak risen over 30 per cent in the period February to July 2014. Thereafter, we have been seeing corrections with markets unable to break above previous highs, and also finding support at lower levels. The levels of 24,900 on the Sensex and 7,425 on Nifty become crucial for the markets to continue the Bull Run.

With monsoon improving the agricultural prospects; everything seems set for corporate performance to improve. It’s time to build one’s investments at current times for a two to three year time frame. The simple strategy should be to buy on dips and wait for things to improve. Making money will not be as easy as the first half of the year, but patient investors will be rewarded.

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

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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