It was a bad week for the markets and they tumbled. Almost all sectors were weak and this was the first weekly loss after four weekly gains. The market lost on four of the five trading days with gains being registered on just Thursday, which was the expiry day for the August series. This up day was on account of short covering.
The BSE SENSEX lost 353.65 points or 1.99 per cent to close at 17,429.56 points while the NSE NIFTY lost 128.30 points or 2.38 per cent to close at 5,258.50 points. The broader indices like the BSE500, BSE200 and BSE100 lost 2.09 per cent, 2.11 per cent and 2.18 per cent respectively while the BSE MIDCAP lost 1.87 per cent and the BSE SMALLCAP a substantial 2.73 per cent. In sectoral indices BSE FMCG gained 1.05 per cent. The losers saw BSE METAL lose 7.05 per cent, BSE REALTY down 5.01 per cent, BSE CAP down 4.85 per cent and BSE AUTO down 3.71 per cent.
In individual stocks, the few gainers included TCS up 1.84 per cent and HDFC up 1.38 per cent. In other stocks, Pipavav Defence gained 12.24 per cent. The losers were many with Sterlite down 14.30 per cent, Sesa Goa down 10.63 per cent, REC down 7.94 per cent, Hero Motocorp down 7.69 per cent, PFC down 7.47 per cent, BHEL down 7.27 per cent, and Axis Bank down 7.06 per cent. Other losers included HPCL, BPCL, Hindalco and ICICI Bank.
With last week’s losses, about half the gains of over four weeks have been wiped out. FIIs continued to be aggressive in their purchases and bought stock worth Rs 3,500 crore while domestic institutions sold shares worth Rs 670 crore. The Indian Rupee was virtually unchanged and closed at Rs 55.53 down 0.03 over the previous week.
There was plenty of news flow, which kept the market active. The ‘Coalgate’ scandal kept Parliament in the news and ensured that no business was transacted on any day of the week. The UPA Chairperson and Congress president would be out of the country for the week beginning from September 3 and which happens to be the last week of the Monsoon Session, and thus ensure a complete washout of Parliament.
Federal Reserve chief, Ben Bernanke, kept people guessing about QE3 and has kept all options open. His comments from Jackson Hole saw US markets cheering these comments on the last trading day of the week. The panel headed by Shome on "GAAR" has recommended that the same be postponed by three years and include non-resident Indians as well. It also talks about abolishing long term capital gains. What would then happen to Securities Transaction Tax? Probably the recommendations are likely to create more confusion, than anything else. One other thing that is however clear is that the government is not interested in having the controversial act currently. There would be no impact of this on the markets as GAAR for the time being has been given a burial.
Thejo Engineering would be the first SME issue to be launched on the NSE SME platform. The company is an engineering company providing solutions for bulk material handling, mineral processing and corrosion protection to core sector industries like mining, power, steel, cement ports, fertilisers etc. The company had reported total sales of Rs 117.86 crore for the year ended March 2012. The net profit was Rs 6.70 crore without exceptional items and Rs 9.02 crore considering exceptional item. The company is raising Rs 19 crore in a price band of Rs 402-430. The company is good but the price band leaves nothing on the table for investors as this issue is tantamount to investing as PE (Private Equity) investors. Trading of this issue on the exchange would be through call auction method which would make trading difficult. The valuation demanded at the price band on a fully diluted basis is between 9.94 -10.33 times. Looking at the comparable valuations where companies with lower valuations are available at the main exchange one could avoid the current offering.
Bond issues from companies are back and the first such offering opens on Wednesday September 5, from IIFL (India Infoline Finance Limited). The company is issuing NCDs for Rs 500 crore at a coupon rate of 12.75 per cent. The bonds are for a period of six years and would have interest paid on a monthly, annual and cumulative option. The bonds are rated AA- by CRISIL and ICRA and are unsecured. The monthly option would have an effective yield of 13.52 per cent.
In this week, it would be crucial for the market to take support at 17,150 on the SENSEX and 5,150 on the NIFTY. The resistance levels to be broken on the upside would be 17,850 on the SENSEX and 5,400 on the NIFTY. Looking at the market scenario and the fact that there appear to be no positive drivers for the market in the coming week, it looks a certainty that markets would weaken.
The BSE SENSEX has support at 17,325 points, then at 17,238 points, then at 17,105 points and finally at 16,919 points. It has resistance at 17,545 points, then at 17,720 points, then at 17,820 points and finally at 17,972 points. The NSE NIFTY has support at 5,230 points, then at 5,198 points, then at 5,166 points and finally at 5,125 points. It has resistance at 5,294 points, then at 5,359 points, then at 5,399 points and finally at 5,448 points. Trade cautiously.
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
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