Task cut out for Rajan
Wild market fluctuations preceded the week in which the new RBI Governor takes over, amid a struggling economy and severe government pressure
The BSE Sensex was at its volatile best in the week gone by. After fluctuating wildly where we saw levels of 18,700 on Monday followed by 17,450 and then 18,680 all over again, gained 100.28 points or 5.44 per cent to close at 18,619.72 points. The Nifty gained a mere 0.05 points or a mere 0.00 per cent to close at 5,471.80 points.
The broader indices like the BSE100, BSE200 and BSE500 lost some ground to lose 0.0.9 per cent, 0.08 per cent and 0.17 per cent respectively. The BSEMIDCAP lost 1.09 per cent while the BSESMALLCAP lost 1.07 per cent. The top gainer amongst sectoral indices was BSEIT which gained 6.40 per cent. The other gainers were BSETECH up 5.06 per cent and BSEHEALTHCARE up 3.52 per cent. The losers were led by BSEPSU down 4.54 per cent. Other losers included BSEBANKEX down 4.51 per cent and BSEREALTY down 4.08 per cent.
In individual stocks the biggest gainer was MCX up 27.59 per cent. Others included Sesa Goa up 22.50 per cent, TCS up 10.67 per cent, Dr Reddy up 8.26 per cent and HeroMoto up 6.79 per cent. The biggest loser was IDFC down 21.54 per cent. Other losers included Financial Technologies down 15.05 per cent, PNB down 10.99 per cent and Union Bank down 10.48 per cent.
The Sensex in the last seven trading sessions beginning August 22 has moved a whopping 3,480 points while the Nifty has moved 1,059 points. On a net basis the change is 714 points on the Sensex and 169 on the Nifty. This volatility seems to be very much on the higher side and reflects the nervousness in the markets. The Indian Rupee touched a lifetime low of R 68.80 and in the process registered its highest ever single day loss and while recovering subsequently, registered its highest ever intra-day gain, both of about 2.5 per cent. The rupee finally closed at R 65.70, a weekly loss of R 2.50 or almost 4 per cent.
The Reserve Bank of India governor steps down during the week and the new incumbent takes over from September 5. The first monetary policy review by new governor Raghuram Rajan will take place on September 20 post the FED meeting in the United States, where greater clarity about the planned quantitative easing will become likely. The job for the new governor is indeed cut out as he is faced with demands from a beleaguered government which would shortly be election-bound, and an economy which is clearly struggling. The falling GDP numbers and a depreciating rupee certainly do not help matters.
FIIs seemed to be becoming a nervous lot these days. They sold equities worth R3,000 crore during the week. What is more disturbing is the fact that gross turnover on each day of the week is close to R 10,000 crs, indicating huge churning. The average earlier was less than half these numbers. Domestic institutions bought R 320 crore.
August series futures expired on Thursday amidst heightened volatility at 5,409.05, a monthly loss of almost 8.43 per cent or 498.45 points. The positive side saw the BSE IT index hit a lifetime high and cross levels last seen in February 2000. The other sector which is in the news is the BSEHEALTH which is close to its lifetime high made earlier this year in July.
The week saw the food security and land acquisition bills being passed. While politically these maybe great for the government, at a fiscal level they spell bad news. Industry is up in arms over the land acquisition bill and have expressed reservations about the same. The Syrian crisis and the potential of strikes by the UN saw gold and oil prices rise. In India gold prices hit a lifetime high thanks to the government pleading citizens not to import gold.
The PM addressed both Houses of Parliament on the economic scenario and said that the GDP for the quarter would be flat. The numbers which came out in the evening were pathetic as they were down 18 per cent year on year from 5.4 per cent to 4.4 per cent and down from 4.8 per cent quarter on quarter. I am not sure whether the definition of the term flat would now change to include it as being negative from 15 per cent to 20 per cent.
The week is likely to open on a negative note post the dismal GDP numbers. Key levels for the SENSEX are 17,800 and 19,200 while they are 5,240 and 5,585 for the NIFTY. The support for the SENSEX is at 18,304, then at 18,135points, then at 17,950 points and finally at 17,755 points. It has resistance at 18,640 points, then at 18,818 points, then at 18,976 points and finally at 19,155 points. The NIFTY has support at 5,406 points, then at 5,315 points, then at 5,215 points and finally at 5,065 points. It has resistance at 5,387 points, then at 5,496 points, then at 5,565 points and finally at 5,608 points. The week ahead will continue to be volatile and give opportunities to trade on both sides. Trade cautiously.
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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