Different factors put brakes on earlier buoyancy; caution signs go up in lights

Jun 12, 2017, 09:09 IST | Arun Kejriwal

Arun KejriwalArun Kejriwal

Markets were more circumspect last week and the BSESENSEX lost 11.23 points or 0.04 per cent to close at 31,262.06 points. NIFTY gained 14.75 points or 0.15 per cent to end at 9,668.25 points. The broader markets saw the BSE100, BSE200 and BSE500 gain a bit better at 0.19 per cent, 0.32 per cent and 0.49 per cent respectively. BSEMIDCAP and BSESMALLCAP fared even better gaining 0.50 per cent and 1.55 per cent.

The top sectoral gainer was BSECON DUR up 2.83 per cent followed by BSEMETAL 2.67 per cent and BSEHEACAR 2.54 per cent. The top loser was BSEIT down 1.51 per cent followed by BSEFMCG 1.49 per cent and BSETECH 1.41 per cent. In individual stocks the top gainer was Maruti up 4.73 per cent followed by Cipla 4.045 and Dr Reddy 3.03 per cent. On the losing side was ITC down 4.06 per cent followed by Bank of Baroda 3.04 per cent and Coal India 2.66 per cent.

Anti-Conservative Party and anti-Democratic Unionist Party (DUP) demonstrators in central London. Theresa May is determined to form the Govt, notwithstanding the bloody nose in the general elections. Pic/AFPAnti-Conservative Party and anti-Democratic Unionist Party (DUP) demonstrators in central London. Theresa May is determined to form the Govt, notwithstanding the bloody nose in the general elections. Pic/AFP

The Indian Rupee gained 20 paisa or 0.31 per cent to close at 64.24. Dow Jones gained 65.68 points or 0.31 per cent to close at 21,271.97 points. The British PM Theresa May failed to get majority in the snap poll called and would have to make do with the support of a small regional party. It clearly shows that things can go wrong and cause upsets.

Monsoon mood
Back home, the Reserve Bank of India (RBI) at its monetary policy review kept rates unchanged. It however reduced SLR by 50 basis points to 20 per cent. The rates being kept unchanged were on expected lines as far as the market was concerned, even though government circles expected a cut in the same.

The primary market would again swing this week with the issue from Tejas Networks being open during the week. This would be followed by the issues from Eris Lifesciences Limited and CDSL. The monsoon has advanced and the financial capital Mumbai has seen rains during the weekend. This would have a positive impact on markets in the week. The monsoon has a big impact on the country and the first rains in Mumbai always have a positive impact on our markets.

A robust monsoon spells good news for the markets
A robust monsoon spells good news for the markets

Roll out anxiety
Results season is over without any definite trends whatsoever. GST is scheduled for a roll out in about three weeks’ time on July 1. There are many issues which have to be resolved in the intervening period. Whether there is a last minute change in roll out at the eleventh hour or not is immaterial, as the government machinery has moved significantly to get things in place. The operations and scale of this reform is gigantic and involves a lot of people moving to the organised sector from the unorganised sector. While changeover is imminent and would imply that any one opposing the same or not embracing it would be wiped out, there are likely to be teething problems which would affect industry in the current month of June and also July when it is rolled out.

Valuations are undoubtedly expensive and in normal course would not be justifiable. In the current scenario, the only reason why they seem to be sustaining is the huge liquidity in the markets and also the fact that inflows into the mutual funds through SIPs are seeing new records being set. It makes sense therefore not to challenge the mood or the sentiment and allow markets to run their course. Use sharp rallies to exit some positions and sharp corrections to enter. Such opportunities would be available in plenty.

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.

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