Nervous, and it shows!

Back off for a while, as an atmosphere of uncertainty is all pervasive

The markets continued to remain volatile and on four of the five trading days, we had big movements with just one day being flat. The fact that all movements were ultimately neutralised and the BSE SENSEX closed virtually flat, losing 9.84 points or 0.04 per cent to close at 26,625.91 points. NIFTY gained a fraction at 0.15 points to close at 8,170.20 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 0.09 per cent, 0.04 per cent and gain 0.04 per cent respectively. The BSEMIDCAP lost 0.15 per cent but BSESMALLCAP gained 0.64 per cent.

Reserve Bank of India (RBI) governor Raghuram Rajan during a recent press conference following a monetary policy review meeting in Mumbai. Rajan will step down when his term ends in September, he wrote in a note to colleagues published on the central bank's website over the weekend. Pic/AFP
Reserve Bank of India (RBI) governor Raghuram Rajan during a recent press conference following a monetary policy review meeting in Mumbai. Rajan will step down when his term ends in September, he wrote in a note to colleagues published on the central bank's website over the weekend. Pic/AFP

The top sectoral gainer was BSE REALTY up 2.66 per cent followed by BSE PSU 1.775 and BSE FMCG 1.26 per cent. The losers were led by BSE BANKEX down 0.90 per cent and followed by BSE HEACAR 0.44 per cent and BSE AUTO 0.39 per cent. In individual stocks, PSU bank PNB was the top gainer up 12.57 per cent followed by Vedanta 4.88 per cent, GAIL 4.70 per cent and SBI 3.49 per cent. The losers were led by private bank ICICI down 5.66 per cent and followed by Cairn India 5.27 per cent and ONGC, 3.42 per cent. It is indeed coincidental that on the one hand, the top gainers are led by PSU bankers and the top loser is led by a private bank.

RR says goodbye
US Fed on expected lines, kept interest rates unchanged but the commentary post the meeting was not showing confidence on the economy and made markets nervous. The Dow Jones lost 190.18 points or 1.06 per cent to close at 17,865.34 points. The Indian Rupee lost 32 paisa or 0.48 per cent to close at 67.08 to the dollar.

Raghuram Rajan, the RBI Governor has conveyed to his senior staff that he would be returning to his teaching job once his term ends on September 4. There would be a knee jerk reaction in equity, bonds and currency markets when they open today. However to the credit of the man, it must be said that he has kept the dignity of the high office by ending speculation on his future by writing to his senior staff. Also one must remember that the chair is bigger than the man who occupies it, and, RR has kept that honour and status. He has performed under challenging times and the new incumbent would inherit a job which would continue to be challenging.

The primary markets see the offer for sale from Mahanagar Gas Limited (MGL) opening on Tuesday June 21, and closing on Thursday, June 23. The offer is for 246.94 lakh shares in a price band of Rs 380 to 421. The company supplies CNG and PNG in Mumbai and its surrounding areas and has added the district of Raigarh to its area. The price earnings ratio is 12.10 to 13.40 based on the earnings of Rs 31.4 for the year ended March 2016. This is at a substantial discount to the PE ratio of its comparable Indraprastha Gas, which does a similar activity in the NCR region and quotes at a price of Rs 617.40. The PE for the year ended March 2016 is 20.76.

The only concern about MGL is the fact that Mumbai being an island, has its limitations to growth and that would be addressed over the next 18-24 months, when the infrastructure in Raigarh is laid out. The discount however is more than adequate, and it makes sense to apply for the minimum lot in the retail category, as the issue would be oversubscribed.

Waiting for rains
The monsoon in Mumbai seems to be elusive and though we have had sporadic showers even as I am writing this article, the Mumbai monsoon is yet to happen. The heat and humidity is killing and probably the same is having its toll on the markets as well, which seem to be going nowhere.

The important international event is ‘BREXIT’ slated for June 23. There would be nervousness ahead of the same in global markets, and it is correct to say that market activity would be muted ahead of the event. The options are limited and no one wants it to happen, but a referendum can throw up interesting results. Suppose the referendum comes out with results of between 50-51 per cent wanting to leave the Euro while about 48-49 per cent want to continue, what would happen? Markets are in a confused state currently and it makes sense to just stay away for the next 10-12 days. It might make better sense to return in July when ‘Brexit’ is behind the world.

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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