Shockingly volatile

The markets were extremely volatile and it would not be incorrect to say that they seemed to defy all logic last week. There were two big day movements on Monday when the SENSEX rose 326 points and on Friday when it fell 455 points. The volatile week saw the BSESENSEX gain 55.97 points or 0.28 per cent to close at 19,760.30 points.

N R Narayana Murthy (second right), looks at outgoing chairman K V Kamath (right), as CEO SD Shibulal (second left) and former Chief Executive Officer Kris Gopalakrishna (left) look on at a press conference at the company’s headquarters in Bangalore on June 1, 2013. Infosys reappointed Murthy to lead the firm two years after he retired, as the company grapples with weak earnings and falling market share. Pic/AFP

The NSENIFTY gained 2.40 points or 0.04 per cent to close at 5,985.95 points. The broader indices suffered minor losses with the BSE100, BSE200 and BSE500 losing 0.21 per cent, 0.06 per cent and 0.09 per cent respectively. The BSEMIDCAP gained 0.04 per cent while BSESMALLCAP lost 0.82 per cent. The market was completely mixed with various sectors performing differently. The top gainer was BSECONSUMER up 3.52 per cent followed by BSEAUTO up 2.70 per cent and BSEIT up 1.86 per cent. The losers included BSEREALTY down 6.27 per cent, BSEBANK down 2.26 per cent, BSECAP down 1.89 per cent and BSEMETAL down 1.78 per cent. 

The volatility in the markets seems to be reaching new levels. Though the net weekly change in the SENSEX was a mere 56 points, the daily net change added for the week was a staggering 992 points while on the NIFTY, the change was 2 points and the cumulative 294 points. This volatility captures FII buying, quarterly and annual results, Rupee value, global markets and the political situation. The movement is beyond comprehension and traders should use every rally possible to exit long positions.

The GDP numbers for the quarter January-March 2013 were a dismal 4.8 per cent which made the annual GDP for 2012-13 at 5 per cent, the lowest in a decade. This puts great pressure on the RBI Governor when he meets for the mid-quarter review on Monday, June 17. With these dismal numbers, expectations of a rate cut are now declining.

FIIs were big buyers during the week pumping in over R3,330 crore. The disturbing fact is that they have sold over R6,200 crore in the debt market in the last seven trading sessions, negating the equity inflows. The Indian Rupee continued to depreciate and closed at 56.50 to the US dollar. Domestic institutions were net sellers at R360 crore. One always wondered with such strong FII inflows, why the rupee was still depreciating. The answer lies in the fact that there has been a stronger outflow on the debt market side.

Infosys founder and former chairman N R Narayana Murthy is back as Executive Chairman replacing K V Kamath. This clearly demonstrates the failure of Kamath in bringing together the team at Infosys. The shares are certainly going to rally in the coming week due to the anticipated turnaround of the company. Some inclination of this was available to some people as Infosys was probably the only stock standing in the benchmark indices on Friday when the whole market just tumbled.

May series futures ended peacefully with the NIFTY gaining 208.20 points or 3.52 per cent. The very next day, the markets tumbled and recorded their greatest fall in 15 months. One gets a feeling that the weakness had actually stepped in on Thursday, but the markets were kept going so that rollovers would happen. The fall on Friday was too big for a single day and some rebound is certain in the coming week.

Shares of Just Dial would list most probably on Wednesday and should trade at a substantial premium to the issue price of R530. The issue was oversubscribed over 11.60 times. It is expected that there could be an 18-20 per cent premium to the issue price. The last date for complying with the 25 per cent minimum public shareholding expires on Monday, June 3, for private companies. The number of Offers For Sale (OFS) has increased quite sharply, but we still have several companies who are yet to comply. These companies’ shares could be under pressure on Monday depending on what action SEBI takes for non-compliance

Key levels for the SENSEX are 19,550 and 20,200 while similar levels for the NIFTY are 5,925 and 6,135 respectively. The BSESENSEX has support at 19,561 points, then at 19,445 points, then at 19,284 points and finally at 19,136 points. It has resistance at 19,945 points, then at 20,146 points, then at 20,254 points and finally at 20,443 points The NSENIFTY has support at 5,935 points, then at 5,867 points, then at 5,789 points and finally at 5,675 points. It has resistance at 6,069 points, then at 6,135 points, then at 6,180 points and finally at 6,235 points. Trade cautiously and as mentioned earlier, use any rally to exit long positions.

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

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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