Keep money in hand and stagger your investments in these tough times
MoS Finance Arjun Ram Meghwal administers the oath in the presence of Delhi BJP President Satish Upadhyay, Union Minister Harsh Vardhan, Opposition leader in Delhi Assembly Vijender Gupta and others during the BJP’s Sankalp March to fight against black money and corruption. Pic/PTI
Markets recovered on expected lines and were up on three of the five trading days. The net result was a gain of 166.10 points or 0.64 per cent of the BSE SENSEX which closed at 26,316.34 points, while NIFTY gained 40.20 points or 0.50 per cent and closed at 8,114.30 points. The broader markets performed matter with BSE100, BSE200 and BSE500 gaining 0.63 per cent, 0.77 per cent and 0.77 per cent respectively. BSEMIDCAP gained 0.92 per cent and BSESMALLCAP 1.34 per cent. November futures expired with massive losses and closed down 649.75 points or 7.54 per cent at 7,965.50 points. This is the biggest monthly loss in the calendar year 2016.
In sectoral gainers, the top performer was BSEIT up 6.61 per cent followed by BSETECK 5.16 per cent and BSEMETAL 4.37 per cent. A surprise gainer was BSECONDUR 2.91 per cent. The losers were led by BSEBANKEX down 2.50 per cent followed by BSEAUTO 2.195 and BSEPSU 0.82 per cent. In individual stocks, the top gainer was Vedanta Limited up 9.30 per cent followed by Hindalco 8.88 per cent. IT stocks TCS gained 8.73 per cent followed by Infosys 6.25 per cent. The losers were led by BHEL down 5.48 per cent followed by M&M 5.16 per cent. Banking shares were losers with PNB down 6.28 per cent along with State Bank 5.35 per cent and Bank of Baroda 5.01 per cent.
In the coming weeks, focus would shift to what the central bank would do in India and the US. RBI meets on Tuesday, December 6, where a 50 basis points cut is expected against the 25 basis points earlier. This bigger expectation is on the basis of huge liquidity in the banking system post the November 8 demonetisation announcement. RBI has increased the CRR (cash reserve ratio) to effectively 100 per cent post November 8 as of Saturday. This means that banks would earn nothing on the cash lying in savings account of customers but would have to pay. Interest rates therefore have to fall and this could be significant.
There is an IPO from Sheela Foam Limited opening on Tuesday November 29 and closing on December 1. The company which manufactures mattresses under the ‘Sleepwell’ brand is selling shares worth Rs 510 crore in a price band of Rs 680-730. It makes imminent sense to skip the share at the current time and wait for its listing before taking a call when to enter.
Markets are in a state of flux and rallied last week on expected lines. The selling and nervousness is certainly not over. One should not be surprised if they are once again under pressure this week. It makes sense to look at the markets with a six month horizon. The current quarter which comprises October, November and December would be under severe pressure and likely to report negative growth because three weeks of November would see muted sales. The fourth quarter January to March would see the budget being presented and the possibility of GST being delayed looms large with opposition from political parties against the demonetisation controlling states. In such a situation, things would be tough in the coming few months.
What should an investor do? I believe keeping cash in hand and doing periodic purchases in a calibrated manner over the next four to six months would be rewarding. Buy shares and invest as you would do under a systematic investment plan over five to six months. This would be a fruitful and rewarding exercise.
Times are tough and one needs to keep resources at hand. Different shares would bottom out at different times and also fare differently as people adjust to the changed environment. A staggered investment seems to be the best plan of action in current situation.
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.