The volatile files

Sharp turnarounds and turbulence defining factors

The markets were super volatile last week and did a complete ‘U’ turn midweek. On the first two days of the week, the Sensex had lost 653 points and the remaining three days it recovered all of it and a wee bit more.

Gold prices are falling, which is good news for India. Pic/Bipin Kokate
Gold prices are falling, which is good news for India. Pic/Bipin Kokate

The markets recovered 655 points. The weekly change was a mere 2 points but it does not tell the story that the change was effectively 1,308 points on the Sensex.

The Sensex at the end of the volatile week closed virtually unchanged, up 2 points or 0.01 per cent to close at 28,114.56 points while Nifty gained 11.30 points or 0.13 per cent to close at 8,532.85 points.

The broader markets saw the BSE100, BSE200, BSE500 gain more at 0.13 per cent, 0.33 per cent and 0.46 per cent respectively. The BSEMIDCAP gained 1.12 per cent whilst BSESMALLCAP gained 1.39 per cent.

Gainers
In sectoral gainers, the top one was BSE FMCG up 3.11 per cent followed by BSE REALTY 2.60 per cent and BSE HEALTHCARE 1.25 per cent. The losers were led by BSE OIL&GAS 2.49 per cent, BSE CONDUR 1.98 per cent and BSE METAL 1.18 per cent.

In individual stocks the gainers were led by Bank of Baroda 14.30 per cent, DLF 11.40 per cent, Union Bank 11.40 per cent and Punjab National bank 8.41 per cent. The losers were led by NMDC down 10.41 per cent and followed by Indian Oil 5.70 per cent and REC 5.28 per cent.

World markets too were choppy and volatile led by China. The Dow Jones closed at 17,689.86 points, a gain of 121.33 points or 0.69 per cent. The Indian rupee lost 10 paisa or 0.16 per cent to close at R64.13. FIIs were sellers and provisional data showed that they sold shares worth Rs 2,450 crore, while domestic institutions bought shares worth Rs 2,430 crore.

The offer for sale from Syngene International Limited was oversubscribed about 32 times. The company had offered 2.2 crore shares in a price band of R240-250. The OFS from PFC (Power Finance Corporation) which had an option for retail investors to apply at “cut-off” saw excellent response and was very well subscribed.

The unfortunate part was that retail investors actually got cut off from the issue as the cut-off price was substantially lower than the allotment price in the retail category. It’s a completely different thing that share price of PFC subsequently fell in the week and investors who were not allotted shares were indeed lucky.

Projects
CII had a conference on real estate and the majority of speakers believe that the way forward would be to ease permissions and thus reduce cost of projects.

Also for affordable housing to become a reality, land prices as a percentage of flat prices have to come down significantly. Another thing that emerged was that in the premium segment there is a substantial build-up of inventory and it would take time to dispose of the same.

The continued fall in prices of crude saw petrol prices being cut by Rs 2.43 and that of diesel by Rs 3.60. Along with crude even gold prices are falling and both these commodities softening, are good news for India. The government has decided to infuse Rs 70,000 crore into the public sector banks over the next four years and of this Rs 25,000 crore would be infused in the current year.

This saw the public sector banks gaining handsomely on Friday. It is believed that RBI governor Raghuram Rajan in the credit policy review on Tuesday August 4, may or may not change rates. The street is divided this time but the negative part is that the stock market rally on Friday believes that rate cut would happen. The event is just two days away and one would have to wait for the same.

In yet another positive development the EPFO or pension body would invest R5,000 crore to begin with in ETFs on the exchange on Thursday, August 6. With pension funds coming to the equity market it would boost demand and help the pension fund managers reap better returns as well.

Choppy
July series futures expired at 8,421.80 on the Nifty, a gain of a mere 23.80 points or 0.69 per cent. The strong rally came on Friday and it would have to be seen how markets behave going forward.

The week ahead would see RBI announce its policy review and rate cut would be a driver either way. The banking rally would need to carry on if the infusion would happen as early as expected. Choppy and volatile markets expected with trading opportunities on either side.

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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