Seatbelts on and brace for impact of the sweeping Bharatiya Janata Party (BJP) win
It is Holi in an auto rickshaw in Mathura in Uttar Pradesh yesterday, now we need to watch if the market reflects the celebratory sentiment today. Pic/ AFP
The markets were lacklustre last week and it appears that the lull was before the storm which is sure to hit Dalal Street on Tuesday morning. The week saw the BSESENSEX gain 113.78 points or 0.39 per cent to close at 28946.23 points. NIFTY was up 37 points or 0.42 per cent to close at 8,934.55 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 0.22 per cent, 0.19 per cent and 0.16 per cent respectively.
The landslide win in Uttar Pradesh where the Bharatiya Janata Party (BJP) won 312 seats on its own and another 12 by its allies making a total of 324 out of 403, in a by and large three cornered contest is indeed a very big win. Sample this that the Congress which was a partner of the Samajwadi Party has been reduced to seven seats against the 28 it held. Similar was the success in Uttrakhand as well.
Prime Minister Narendra Modi being garlanded at the party headquarters in New Delhi to celebrate victory in Uttar Pradesh and Uttrakhand Assembly elections in New Delhi. Pic/PTI
The big disappointment would be the performance of the Aam Aadmi Party (AAP) which dreamt of forming governments in both Goa and Punjab. They managed a mere 20 seats out of 117 in Punjab and managed none in Goa. Even worse was that 20 of their candidates lost their deposit in Punjab, while 33 did so in Goa. While celebrations were planned in Delhi at the Chief Minister's (CM) house, the guests did not have to show up.
Look at Mayawati, the Bahujan Samaj Party (BSP) supremo whose present Rajya Sabha term ends in April 2018. With no new elections due till 2019, she would not be able to retain the Rajya Sabha seat as her party does not have the numbers to have her re-elected. As far as Akhilesh Yadav of the Samajwadi Party is concerned the Pari-War has decimated the party and they are at just one-fourth the size that they were in the outgoing house.
The reason why I am writing these political facts is for readers to digest the magnitude of the BJP win. This makes Narendra Modi, the tallest leader. This win is bound to have a huge impact on our markets when they open today morning.
In Singapore, where the NIFTY is traded the same had made a high of 9,198 points which is a gain of over 260 points. The same was trading around 9,185 points when this article was written. The all-time high on the BSESENSEX is 30,024.74 points intraday made on March 4, 2015. The index had closed at 29,380.73 points on that day compared to the previous day's close of 29,593.73 points. NIFTY on the same day had made an all-time high of 9,119.20 points and closed at 8,922.65 points. The previous days close was 8,996.25 points.
Our markets having made new all-time highs would then be subject to huge volumes, volatility, euphoria coupled with short covering. One can in such a scenario get easily carried away. It would be therefore wise and apt to have an action plan of what exactly one would like to do. I believe, having made a fresh high and breaking out from a two-year-old level would see markets going even higher, but after a break. In all probability, after the initial outburst and a new high, profit taking would set in which would bring us to levels closer to what they were last week or a little lower where there would be consolidation and more important, time being spent after having entered new territory.
The correction would be more in time and less in value as markets need to regain their breath and momentum before a new upmove begins. We would be entering the end of the financial year and money markets are always tight at this time, so money flow does get impacted.
In global news, the US Fed will meet this week to decide on interest rates and they would, in all probability rise by 25 basis points. While this news is widely known, the important point would be the minutes of the meeting as they would indicate the possibility of more rate increases in the remaining eight months of the current calendar year.
The IPO from Avenue Supermarts Limited was a runaway success and garnered huge subscription. The issue was subscribed a massive 104.5 times with QIB portion subscribed 144.62 times, HNI 277.74 times and Retail 7.51 times. There were about 18.5 lakh applications which is 50 per cent higher than the figure received in the previous issue from BSE. This subscription translates into a total collection of Rs 1,37,461 crore for the company against a total issue size of just Rs 1,870 crore.
Mind boggling response for the issue and to add to the same is the fact that the grey market premium is closer to 85 per cent of the issue price. The share has created history and is likely to continue doing the same. The markets are in euphoria and caution needs to be the buzzword. Use the euphoria to book profits and plan your re-entry once the inevitable profit taking happens.
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.