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Taking stock

The monsoon, election results and a guessing game of who will be the next Finance Minister keeps things drifting

The markets were weak and lost ground on the four trading days last week. It is significant that even though markets closed negative on all four days the losses were not significant with the BSESENSEX losing 284.18 points or 1.25 per cent to close at 22,403.89 points.

BJP's PM candidate Narendra Modi has the Indian markets agog and it is now politics that is going to dictate direction. Pic/AFP
BJP's PM candidate Narendra Modi has the Indian markets agog and it is now politics that is going to dictate direction. Pic/AFP

Election anticipation
The Nifty lost 87.95 points or 1.30 per cent to close at 6,694.80 points. The BSE100, BSE200 and BSE500 lost a similar amount at 1.37 per cent, 1.2 per cent and 1.24 per cent. The BSEMIDCAP lost a mere 0.22 per cent while the BSESMALLCAP lost 0.85 per cent. With this weekly loss markets have begun to consolidate and wait till election results are out on May 16.

The sectoral gainers were few with BSEHEALTHCARE being the biggest gainer at 2.24 per cent and BSEIT being the only other gainer at 0.68 per cent. The losers were led by BSEMETAL down 5.68 per cent followed by BSECAPGOOD down 5.45 per cent and BSEREALTY down 4.89 per cent.

In individual stocks, Wockhardt was a big gainer up 18.58 per cent and Dr Reddy up 4.23 per cent. On the losing side, there were quite a few with Just Dial losing 15 per cent, Jet Airways down 13.53 per cent, Jindal Steel down 13.25 per cent, DLF down 9.07 per cent and Tata Steel down 8.33 per cent. Very clearly the losers outstripped the gainers.

International factors
In international news, Dow closed at 16,512.89 points a gain of 196.43 points or 1.20 per cent. The FED has continued with gradual tapering and reduced by another 10 billion dollars to 45 billion dollars. In important news, the US has added 288,000 non-farm jobs its best in recent times. These were some of the reasons why the Dow recovered.

In India, FIIs continued to be buyers and bought equity worth R 1,870 crores for the last week and R 7,300 crores for April. Domestic institutions were sellers of R 533 crores for the week and R 2,900 crores for the month. The Indian rupee appreciated 46 paisa to close at R 60.16.

Consolidation phase
Seven of the nine phases of elections have been completed and the remaining two will be held on May 8 and 12 with the results to be announced on May 16. The markets over the last couple of weeks have made new highs but are now in a consolidating phase. The fact that intra-day movement and volatility has reduced implies that there may not be too many surprises in the poll results.

The markets believe that there will be a change in government and that the new government would be stable. It is this belief that has seen the Sensex and Nifty rise over 10 per cent from the levels prior to the state elections which were held in November-December 2013.

These present elections have become highly charged and emotional and looking at the fact that it is all parties against one party, clearly indicates which way the wind is blowing. More than one party it is one individual who has charged or electrified the campaign and masterminded the entire party campaign.

One wonders how parties who have limited reach and representatives in the house can decide who the Prime Minister should not be. It is the prerogative of the largest party to form the government and choose their leader. The markets are slowly but surely getting into the mood where they have discounted the change in government led by the BJP.

The moot point that remains is how many seats would they get on their own and the pre-poll alliance of the NDA get. There could be some movement in the indices on the numbers increasing beyond 272.

Guessing game
Post the elections, there would be reactions to various cabinets being appointed and our markets would be keen to see who the next Finance Minister and Planning Commission Chairperson are. These things would keep the markets busy. Having resolved these issues the monsoon and El Nino would become centre stage and our markets always have enough issues to keep them busy.

The economy is in a bad shape and there are no two ways about it. Markets live on optimism and all bull markets are born out of scepticism. The man on the street does not expect miracles but is confident that the juggernaut that is India will come back on track, and, start moving. We all know that the task ahead is mammoth but if the direction and vision is there a lot can be achieved.

Markets would be circumspect this week and strategies to take care of unseen events in the election would be the order of the day. With hedging being the buzz word, markets may in the coming week be lacklustre compared to the action of the last few weeks. In a dull market all focus would be on the challenger entering the home turf of the incumbent in Uttar Pradesh. Enjoy politics as markets take a backseat this week.

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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