The markets were on expected lines for the first four days of the week and remained down. European Central Bank Chief Mario Draghi announced on Thursday that ECB would buy unlimited quantity of bonds and this acted as a very big trigger for markets globally. The US markets made multi year highs but are yet to reach their lifetime highs. In India the SENSEX gained 337 points while the NIFTY gained 104 points. This sharp rally purely on account of global factors was enough to turn the negative mood into positive and the markets closed with substantial gains for the week which had an extra trading session on Saturday of 90 minutes.
Gainers and losers
The BSE SENSEX gained 320.09 points or 1.84 per cent to close at 17,749.65 points. The NSE NIFTY gained 100.20 points or 1.91 per cent to close at 5,358.70 points. The broader indices like the BSE500, BSE200 and BSE100 gained 1.75 per cent, 1.73 per cent and 1.69 per cent. The BSE MIDCAP gained 2.29 per cent while BSE SMALLCAP gained much less at 1.58 per cent. The sectoral gainers included BSE IT up 4.20 per cent, BSE AUTO up 3.24 per cent and BSE REALTY up 2.72 per cent. The smallest gainer this time was BSE FMCG up a mere 0.10 per cent. In individual stocks the gainers included Maruti up 6.23 per cent, Infosys up 5.18 per cent, Tata Motors up 5.11 per cent and Hind Unilever up 4.20 per cent. The losers included BHEL down 5.53 per cent, JSW Steel down 2.3 per cent, UTI Bank down 2.10 per cent and IGL down 1.73 per cent. The markets have more or less recovered the previous week’s losses this time around. The worrying factor is the gains made were only on global cues and had nothing to do with India.
FIIs continued their buying and bought stock worth R766 crore against the previous week’s buying of R3,500 crore. Domestic institutions sold shares worth R240 crore. The Indian Rupee gained marginally and closed at 55.36. The IPO on SME exchange of Thejo Engineering was subscribed 1.53 times. The NCD issue from IIFL was also subscribed. Another bond issue opens this week from Shriram City Union. The company plans to raise R500 crore in two tenures of 3 years and 5 years. The bonds which have been rated AA- by CRISIL are secured and offer a coupon of 11.50 per cent for 3 years and 11.75 per cent for 5 years.
Gold is at a new high in India and has touched a new level of R32,000 per 10 gms. The international price of gold had reached a high of $1925 in September 2011 and then touched $1825 in February 2012. The current price is $1750. The difference is the depreciation of the Indian Rupee which has lost over 21 per cent in the last 12 months. Gold is primarily considered a safe investment and international prices rise whenever there is global turmoil or concern on the health of the financial sector. India is a traditional buyer of gold and every household would have collected gold over the years. In earlier times the only way one could collect or invest gold was buying physical gold. In current times one has multiple opportunities where gold can be invested in through ETF (Exchange Traded Funds), holding gold in demat form in multiples of 1 gram which can be converted into physical gold when required, physical gold, and of course through speculation on the commodity exchanges. The last week of the Monsoon session of Parliament was a washout on the ‘Coalgate’ affair. CBI has begun investigating the companies involved in the matter and many more connections with politicians and people who have been favoured would emerge. The fight which began in Parliament would now be fought in the media and maybe the streets as well.
The immediate trigger for the markets going forward would be reforms and steps to contain the fiscal deficit. Expectations of increase in petro product prices always remain an eternal hope but Petroleum Minister Jaipal Reddy on Friday, September 7, had ruled out any immediate price rise. State elections are due in Gujarat in mid-November and the election code would be in place sometime end-September which gives roughly 20 days for reforms. It’s a tall order and one should keep one’s fingers crossed.
The week ahead would be crucial for the markets simply because of the huge rally of the previous week being on purely global cues. There have been no local factors driving the rally and therefore the same may not be sustainable. This puts the markets in a vulnerable position. Crucial levels for the rally to continue would be 18,000 and then 18,225 on the SENSEX and 5,450 and then 5,515 on the NIFTY. For the markets to remain positive the levels of 17,400 and then 17,225 on the SENSEX and 5,250 and then 5,175 on the NIFTY must hold.
The week ahead is likely to see corrections in case there are no positive local drivers. The market has a negative bias and there could be positive news from RBI when they meet for their mid-quarter review. The BSE SENSEX has support at 17,705 points, then at 17,565 points, then at 17,409 points, then at 17,251 points and finally at 17,055 points. It has resistance at 17,783 points, then at 17,931 points, then at 18,040 points, then at 18,255 points and finally at 18,453 points. The NSE NIFTY has support at 5,346 points, then at 5,305 points, then at 5,260 points, then at 5,215 points and finally at 5,155 points. It has resistance at 5,368 points, then at 5,395 points, then at 5,448 points, then at 5,505 points and finally at 5,565 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
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