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Spark of hope

The markets began trading on a positive note and had gained over one per cent in the first two days of the new fiscal year 2013-14. However, a sharp reversal on Wednesday saw the markets lose ground and in the process the BSESENSEX closed negative for the week, losing 385.54 points or 2.05 per cent to close at 18,450.23 points.


Mukesh Ambani (right) and Anil Ambani signed a deal worth Rs 1,200 crore that would allow Reliance Jio Infocomm, the telecom division of Mukesh’s Reliance Industries, to roll out 4G services using the nationwide optical fibre network operated by Anil’s Reliance Communications. File pic

The NIFTY lost 129.30 points or 2.28 per cent to close at 5,553.25 points. The broader market saw the BSE100, BSE200 and BSE500 losing 1.92 per cent, 1.71 per cent and 1.54 per cent respectively. BSEMIDCAP was virtually flat gaining a tad at 0.04 per cent while BSESMALLCAP gained a whopping 1.89 per cent.

BSEHEALTH was the top gainer up 2.50 per cent. Other gainers included BSEOIL up 1.08 per cent and BSEPSU up 0.44 per cent. The losers were led by BSEFMCG down 3.30 per cent, BSEMETAL down 2.74 per cent, BSEAUTO down 2.53 per cent and BSEIT down 2.24 per cent. In individual stocks, Maruti Suzuki was the top gainer up 9.84 per cent followed by Indraprastha Gas up 9.38 per cent, Hindustan Copper up 9.12 per cent and Cairn India up 6.12 per cent. On the losing side were NMDC down 9.27 per cent, United Spirits down 7.48 per cent and Bharti Tele down 7.25 per cent.

Politics
Political uncertainty has crept into the market place. It is widely believed that with the government having lost majority and now dependent on outside support of two political outfits from Uttar Pradesh, the elections scheduled for May 2014 may be advanced by two quarters and held in October-November 2013 instead.

The second factor is that positive reforms necessary for the nation’s progress have taken a back seat while emphasis is being laid on damage control and pre-election sops. In such a scenario, the markets have turned choppy and nervous. Sugar has been decontrolled and the 10 per cent levy on sugar which was supplied at a fixed price of R19 per kilogram has been abolished. This would benefit sugar mills in the medium to long term; not necessarily from better profits but from substantially lower regulations. This should help the industry to modernise.

FIIs, who were the major driver for the markets, have turned negative and for the first time since January 2013, have been sellers on every day of the week beginning April 1, 2013. The net sales were Rs 825 crore with figures for April 1 not separately available as they have been clubbed with the figures for March 28. This negative figure is against the USD 4 billion purchase in January and February 2013, followed by USD 2 billion in March. Domestic institutions were net buyers of Rs 70 crore. The Indian Rupee depreciated Rs 0.52 or 0.96 per cent to close at 54.80 against the USD.

Deal
RCom and Reliance Industries’ agreement concerning tower and network sharing for the roll out of 4G services from Reliance Jio was announced. It is a win-win situation for both parties. Reliance Industries would pay an upfront fee of Rs 1,200 crore for the deal. This would ensure better capacity utilisation for RCom while it would cut the time to set up the network and also the cost of the network for Reliance.

Data
Several key events are expected to take place this week, with Infosys kicking off the result season by declaring its fourth quarter and annual results for 2012-13 on Friday, April 12. The week would also see the revelation of foreign trade data for February 2013 and IIP data.

Landmark
The open offer from Diageo for shares of United Spirits opens on Wednesday, April 10, at a price of R1,440. The current price of the share is R1,756, which is down Rs 142 or 7.48 per cent in the previous week. The Bombay High Court had turned down any interim relief for Vijay Mallya from lenders to Kingfisher Airlines selling shares of United Spirits.

There are two broad issues involved in this open offer, namely what action would the PSU consortium of banks take with regard to the personal guarantee of Mr Mallya given to them and secondly, the private lenders who have shares as collateral. Would these private banks and NBFCs tender shares at prices, which are lower by almost 18 per cent in the open offer or be forced to sell in the market and give the balance surplus to the PSU consortium? The action would be keenly watched as this is likely to be a landmark case.

Key levels for the SENSEX are 18,250 and 18,950 while similar levels for the NIFTY are 5,465 and 5,755. The BSESENSEX has support at 18,384 points, then at 18,520 points, then at 18,045 points, then at 17,972 and finally at 17,705 points. It has resistance at 18,956 points, then at 18,656 points, then at 18,877 points and finally at 19,075 points. The NSENIFTY has support at 5,532 points, then at 5,490 points, then at 5,448 points and finally at 5,366 points. It has resistance at 5,575 points, then at 5,618 points, then at 5,693 points and finally at 5,748 points.

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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