Robust recovery after short-lived low
Former Prime Minister Manmohan Singh and Finance Minister Arun Jaitley at a book launch in the Capital. Pics/PTI
The week gone by had plenty of action and mid-week, post the Reserve Bank of India (RBI) meeting it looked like the correction had actually set in, but by the weekend, it was proved to be just another blip. Markets recovered all they lost and ended in the green once again. The benchmark indices continued making new highs. The BSESENSEX gained 15.53 points or 0.05 per cent to end at 32,325.41 points. NIFTY gained 51.90 points or 0.52 per cent to close at 10,066.40 points. The broader indices saw the BSE10, BSE200 and BSE500 gain 0.68 per cent, 0.53 per cent and 0.37 per cent respectively. BSEMIDCAP gained 0.70 per cent while BSESMALLCAP lost 0.90 per cent.
The top sectoral gainer was BSECONDUR up 6.66 per cent followed by BSEOIL&GAS 5.33 per cent and BSEPSU 3.31 per cent. The top loser was BSEHEALCARE down 3.72 per cent followed by BSEFMCG 1.60 per cent. In individual stocks, the top gainer was Hero Moto up 9 per cent followed by NTPC 8.215 and Tata Steel 4.33 per cent. The top loser was Dr Reddy down 8.85 per cent followed by Sun Pharma 8.02 per cent and Lupin 6.59 per cent. Dow Jones gained 262.50 points or 1.20 per cent to close at 22,092.81 points. The Indian Rupee had a very strong showing gaining R 0.57 or 0.89 per cent to close at R 63.58.
RBI at its review meeting, cut repo rates to 6 per cent on expected lines, by 25 basis points. A day earlier, some talks had started of the expectation being raised to 50 basis points which did not materialise. Markets took the rate cut as disappointing and corrected themselves for the next two days but bounced back on Friday. Incidentally, the rate cut was near unanimous and was approved with a 5-1 majority.
The government has launched a new ETF (Exchange Traded Fund) known as 'Bharat -22'. The ETF as the name suggests has 22 stocks which also include three of the main stocks from the special fund of Unit 64 known as SUUTI. These stocks are ITC, L&T and Axis Bank. The date of this offer has not yet been announced but one can be sure that it would happen sooner, rather than later. Considering the appetite of new paper in the market, the size of this offering with a green shoe option could be in the region of 2 billion dollars or thereabouts and be a big help in meeting the ambitious target of R 78,000 crore from divestment this year.
The IPO from Cochin Shipyard was a runaway success and garnered subscription of R 1.11 lakh crore for an issue of R 1,468 crore. This issue has probably raised the second highest amount after the issue of Coal India which was for R 15,500 crore and saw subscription in the region of 1.55 lakh crore. The issue from Cochin Shipyard was subscribed 76.19 times with QIB portion subscribed 63.52 times, HNI 288.87 times and Retail 8.51 times. The issue received 20.75 lakh applications surpassing the previous best of 20.13 lakh applications of HUDCO, another PSU offering a couple of months ago.
Result season has entered the last fortnight and the bulk of the results would be up for declaration in this period. While there have been some pleasant surprises and some unpleasant ones as well, it is more of a balance so far. This fortnight would decide the trend for the quarter and the way corporate India is headed going forward.
Markets are looking overheated and richly valued. Liquidity is of course too much and is not allowing any meaningful correction or consolidation to take place. What appeared to be the beginning of a much needed correction post the RBI meet turned out to be a mere blip and markets again started gaining ground in just about 48 hours. One thing is for sure, that the next correction would not be so short-lived and would take much longer and be much deeper.
What should an investor do? Take some money off the table and allow the markets to present an opportunity to re-enter. Even if one looks at the current fall during the week gone by, it was an opportunity to re-enter but only those who had sold earlier could take it. While the going is still great with new tops being made in a routine manner, the incline is getting steeper and the risk-reward ratio that much more against one.
Enjoy the rally as long as it lasts but to enjoy it even more take something off the table and look for corrections to re-enter. Opportunities will be available sooner rather than later.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
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.
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