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Political power play

The national and state level legislative and executive shuffling will influence the Sensex in the coming week

The short three-day week interspersed with holidays had its fair share of drama, but finally ended with flat indices. The BSESENSEX gained a mere three points or 0.01 per cent to close at 27,868.63 points.

The markets seem like they are moving upward. Pic/Bipin Kokate
The markets seem like they are moving upward. Pic/Bipin Kokate

In the process, we made new intraday highs on the benchmark indices as well. The Nifty gained 14.80 points or 0.18 per cent to close at 8,337 points. The broader indices like the BSE100, BSE200 and BSE500 gained 0.30 per cent, 0.45 per cent and 0.53 per cent while the BSEMIDCAP was up 1.68 per cent and the BSESMALLCAP 1.70 per cent.

Sector gains
The top sectoral gainer was BSEREALTY up 5.73 per cent followed by BSEHEALTHCARE 3.70 per cent and BSEBANKEX 1.79 per cent. The losers were led by BSEMETAL down 4.35 per cent, BSEPOWER 1.49 per cent and BSECONDUR 1.30 per cent.

In individual stocks, the top gainer was PSU refiner Hindustan Petroleum up 8.05 per cent, followed by Dr Reddy 7.43 per cent and Axis Bank 6.86 per cent. The losers were led by Gail down 13.45 per cent and followed by NMDC 7.70 per cent and Hero Motocorp 5.32 per cent.

The continued strong showing in the market is on optimism that there would be positive changes going forward and the fact that FIIs have again begun investing after taking a pause in the first fortnight of October.

FIIs invested R 5,042 crores in the three days while domestic institutions sold R 886 crores. The Indian rupee depreciated R 0.25 or 0.41 per cent to close at R 61.61.

Monetary review
There are expectations of a rate cut in the December review of the monetary policy by RBI and no less than the Finance Minister has also begun asking for it.

On the other hand, RBI’s Deputy Governor HR Khan on Friday at a CII event in Mumbai made the top CFO’s realise that just consumer inflation falling is not enough to signal rate cuts.

This left people wondering when a rate cut could happen. In yet another event, the Himachal Pradesh chief minister visited Mumbai and wooed investors to come to the hill state and set up factories.

HP is a power surplus state and readers would be pleasantly surprised that the town of Baddi in HP is home to 60 per cent of the country’s formulation production.

It augurs well that a tourist destination state which has progressed industrially as well is wooing investors from Maharashtra. Prime Minister Narendra Modi has expanded and reshuffled his cabinet and ruffled quite a few feathers.

His appointment of Suresh Prabhu sends a strong signal that ability and performance would be rewarded. One could be sure that even captains of industry would welcome such a strong action of the Prime Minister.

New beginnings
Closer home, the three-day session of the Maharashtra assembly begins from Monday and what stand the Shiv Sena takes will be closely watched.

The fact that the single largest party is willing to run the state as a minority government and also rule it from either Mumbai or New Delhi makes the going tough for the stand to be taken by its estranged ally.

While politics and markets go hand in hand, this time there could be only pleasant surprises and no unpleasant ones. SAT has given much needed relief to realty major DLF in the case where SEBI had banned DLF from redeeming its mutual fund investments.

The main case which concerns debarment from capital markets would be heard in December but the current case in which they got relief also raised important questions in whether the stock market regulator has the right to restrict a listed entity from conducting its business. The share price of DLF rose by Rs 10.05 or 8.07 per cent to close at 134.55.

Money matters
Markets have had a great run and one hears people asking questions should money be taken off the table? It's never a bad idea to book profits and take some money off the table but for those who think of shorting the market, it may not be a good idea.

Foreign flows are too strong and as long as the money keeps coming, there is no way the markets can go down. Secondly, the expectations of reforms and the economy improving are simply not allowing the markets to consolidate beyond a couple of days.

With full working next week of the markets the key drivers would be the way FIIs behaved and invest. If money continues to come to the markets we will see further up move in the market and in case the flows stop there could be a healthy correction, something which everyone is waiting for. Either which way there is no sign of weakness? Ride the rally but do take something off the table and keep on the side for buying when the correction does happen.

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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