Truncated week saves the day

The markets saw trade only for three days in the last week due to holidays; this averted the erratic effects of indices on the Dow Jones

The markets were saved from a roller-coaster ride as they were closed due to Gandhi Jayanti on Thursday and Dussehra on Friday. The Dow Jones had a big fall on Wednesday and then a sharp rally on Thursday. Our markets because of a truncated week, saw thin volumes and a general lack of interest during trading.

Raghuram Rajan looks at his portrait during St. Xavier’s College Malhar Conclave 2014. Pic/Shadab Khan
Raghuram Rajan looks at his portrait during St. Xavier’s College Malhar Conclave 2014. Pic/Shadab Khan

The BSESENSEX lost 58.33 points or 0.22 per cent to close at 26,567.99 points while Nifty lost 23.30 points or 0.29 per cent to close at 7,945.55 points. The broader markets saw the BSE100, BSE200 and BE500 lose 0.30 per cent, 0.12 per cent and gain 0.02 per cent. The BSEMIDCAP gained 0.96 per cent while the BSESMALLCAP gained 1.24 per cent.

Stock activity
In sectoral indices, the top gainer was BSEIT up 3.55 per cent, while BSETECH gained 2.80 per cent. Both these indices are at lifetime highs and along with indices like Infosys, TCS, Wipro, HCL Tech and Tech Mahindra are all at lifetime highs. The other gainers were BSEHEALTHCARE 3.20 per cent and BSECONDUR 2.70 per cent. The losers were led by BSEREALTY down 3.52 per cent, BSEMETAL 2.46 per cent and BSEFMCG 1.52 per cent.

In individual stocks, the gainers were led by Sun Pharma up 6.57 per cent, Ranbaxy 5.87 per cent and Infosys 4.51 per cent. In other stocks, G.E.Shipping was up 8.31 per cent. The losers were led by Jindal Steel down 7.07 per cent, Tata Steel 5.38 per cent and Hindustan Unilever 2.26 per cent. Trading was quite subdued and the rally in small cap and mid cap could be attributed to the substantially higher fall than the rest of the market in the previous week.

Lead by Governor Raghuram Rajan, the Reserve Bank of India last week maintained interest rates on expected lines. However, it is concerned about inflation and the tone of the review indicated that in case the consumer inflation crossed 6 per cent, it could act by raising interest rates. Core sector for August grew to 5.8 per cent against 2.7 per cent in July 2014. We need many such positive numbers for the growth rate to climb to 6 per cent and higher.

FII performance
FII activity was fairly low key during the truncated three-day week. In the same FIIs bought a mere Rs 11.13 crores of equity and for September their purchases were worth Rs 5,448.78 crore. Domestic institutions in the same period were buyers of Rs 1,098.89 crore during the week and Rs 4,171 crore during the month. The Indian rupee lost 47 paisa or 0.77 per cent to close at Rs 61.61.

Markets have been range bound and moving in a broad band of 300-350 points on the Nifty, over the last few weeks. They are waiting for definite signs of improvement in corporate India’s performance. Quarterly results for the period July-September start from next week and bell weather stock from the IT sector Infosys would be declaring its results on Thursday, October 10. As already mentioned, the stock and the sector are at life time highs and any unpleasant news or falling short in expectations could spell disaster for the stock.

International influence
The Dow Jones lost 103.46 points or 0.60 per cent to close at 17,009.69 points. The positive news for India is on the crude oil front where despite the crisis in Libya and Iraq concerning ISIS, crude oil prices are taking a beating. Saudi Arabia deciding to cut crude oil production has had no impact either and Brent crude below 92 is at a more than 2 year low.

This augurs well for India and particularly the oil marketing companies. With diesel finally at market prices and companies making a profit with petrol being at market prices for over two years, these companies should make a killing in the remaining half of the year. The reduction will also benefit oil producing companies ONGC and OIL India as their subsidy sharing would reduce.

Shares of Shemaroo Entertainment Limited listed last Wednesday, and had a really disappointing start considering that the issue was oversubscribed over six times. The price discovery was at Rs 170 against the issue price of Rs 170. Anchor investor HDFC mutual fund did buy and possibly bail out the company with purchases of 7 lakh shares.

This effort was not enough as the share remained locked circuit down at Rs 171 for almost the whole day. It appears the share would be under pressure in the coming week. The week ahead has IIP numbers for August due on October 10. Key drivers would be corporate performance and global cues particularly crude oil prices. Trade cautiously as markets look tired and devoid of momentum.

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

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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