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The great fall

The markets were brutal last week and though it appeared as if the fall would be arrested midweek on Tuesday and Wednesday, it was not to be. The markets have now fallen for eight consecutive sessions.


Troubling times: The banking sector reflects the country’s poor economic scenario

The markets seem to be now approaching a mood of despondency and sanity seems to be leaving the markets. The BSESENSEX lost 584.17 points or 2.96 per cent to close at 19,164.02 points. The NIFTY lost 208.30 points or 3.54 per cent to close at 5,677.30 points. The broader indices like the BSE100, BSE200 and BSE500 lost much more at 3.92 per cent, 4.12 per cent and 4.19 per cent respectively. The BSEMIDCAP lost 6.07 per cent while the BSESMALLCAP lost 6.13 per cent. The top gainer amongst sectoral indices was BSEIT which gained 3.78 per cent. The only other gainers were BSECON up 3.04 per cent and BSETECK up 2.43 per cent. The losers were led by BSEREALTY down 14.63 per cent. Other losers included BSEPOWER down 10.49 per cent, BSEPSU down 9.45 per cent and BSEFMCG down 8.20 per cent.

Losers
In individual stocks the biggest gainer was Wipro, up 14.62 per cent. Others included Titan Industries up 7.99 per cent and Lupin up 4.10 per cent. There were many big losers which included the promoter of National Spot Exchange Limited (NSEL), Financial Technologies. The stock lost a staggering 73.32 per cent. Other losers included MCX down 42.03 per cent, Wockhardt down 26.53 per cent and PFC down 19.09 per cent.

Volatility
The Reserve Bank of India (RBI) in its review meet on Tuesday, July 30, kept interest rates unchanged on expected lines. The important fact is that the rupee volatility and inflation have become key concerns along with the current account deficit and it would take measures to control the same. The rupee however fell 3.49 per cent to Rs 61.10, its lowest closing.

Session
The monsoon session of Parliament begins today and there are a host of bills to be discussed during the short three-week session, including the Ordinance on the Food Security Bill. During the course of last week, the government has allowed FDI in almost every sector and also diluted conditions attributed to FDI in multi-brand retail. There would be issues raised on this in Parliament. The session would have its high and low points but it appears there will be business, this time around.

Crisis
National Spot Exchange of India (NSEL), which has an open interest of roughly Rs 5,500 crore of arbitrage money, is in a financial crisis and has suspended almost all trading contracts. One is not sure when the payment would be made to investors, but the present situation has badly affected not only the promoter company of NSEL, Financial Technologies and its group company MCX, but the entire market. It appeared that the markets would close in positive ground but as details of the crisis emerged, markets slipped into the red.

Banking
The qualities of assets of the banking sector are under severe strain and reflect the poor economic scenario in the country. While PSU banks bore the brunt of selling with Bank of Baroda, Canara Bank, PNB and Union Bank lost over 10 per cent, private banks like Yes Bank were down 16 per cent and ICICI down almost 5 per cent. Very clearly signs from industry do not indicate any turnaround in the near term.

Share
FIIs have stopped their selling spree and were buyers of R 760 crore in equity during the week, while domestic institutions were sellers of R 436 crore. The government completed the formality of divestment in the State Trading Corporation and ITDC. ITDC was sold at a floor price of R 70, when the last traded price was Rs 1,045. The share would remain locked at lower circuit for a minimum of six months, as the share traded is in the periodic call auction, unless the regulators allow a special price discovery session. It may be mentioned that shares of MMTC took a little over five weeks before trading began in the share because of the huge price differential of Rs 200 and 60.

Forecast
This week is likely to have some bounce, just because the eight-day fall is to have a break, but nothing beyond that. Investors would be well advised to stay away from the markets, even though valuations may look attractive. Key levels for the SENSEX are 18,950 and 19,575 while they are 5,575 and 5,850 for the NIFTY. The support for the SENSEX is at 19,011, then at 18,911 points, then at 18,638 points and finally at 18,467 points. It has resistance at 19,384 points, then at 19,583 points, then at 19,757 points and finally at 19,860 points. The NIFTY has support at 5,630 points, then at 5,589 points, then at 5,517 points and finally at 5,455 points. It has resistance at 5,743 points, then at 5,826 points, then at 5,856 points and finally at 5,944 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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