25 July,2011 07:40 AM IST | | Arun Kejriwal
The next few days would be full of action leading to volatility
Last week, the markets did virtually nothing for the first four daysu00a0 and it was only a spirited rally on Friday, which saw the entire market mood changing and suddenly becoming positive.
The BSE Sensex gained 286 points last Friday, July 22 and wiped out the losses during the previous week, gaining a net 160.38 points or 0.86 per cent to close at 18,722.30 points.
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The NSE Nifty gained 52.85 points or 0.95 per cent to close at 5,633.95 points. The BSE100, BSE200 and BSE500 gained 0.73 per cent, 0.60 per cent and 0.60 per cent respectively.
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The BSE Midcap index gained 0.56 per cent while the BSE Smallcap gained 1.20 per cent.
Results
Last week Crompton Greaves was a big loser Rs 60.45 or 24.88 per cent at Rs 182.55. A number of reasons led to this fall, which included poor results, lowering of guidance, alleged insider trading by the former Managing Director and purchase of an aircraft by the company. The net result of this was a sharp downside and people talking about the company. I believe the company needs to now reassure investors about its future prospects.
Issues
There is an Initial Public Offering (IPO) from the L&T group after 61 years in the form of L&T Finance Holdings Limited. The company is raising a total of Rs 1,245 crore in a price band of Rs 51-59 through an issue, which opens on Wednesday, July 27 and closes on Friday, July 29.
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There is a reservation of Rs 50 crore for employees and Rs 120 crore for shareholders of the parent company L&T. The company had made a pre-IPO placement of 6 crore shares at Rs 55 and would also be allotting shares to anchor investors on Tuesday, July 26.
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The anchor price and the pre-IPO price is where the company is likely to allocate shares in the IPO and I believe retail investors should subscribe at that price.
All in all it looks like an issue where there would be listing gains provided the issue is priced at Rs 55-56. I recommend retail investors to subscribe at this price.
Bonds of Shriram Transport Finance listed during the last week and there have been gains of 3 per cent in the 11.6 percent 5-year tenure bonds. The issue was very heavily subscribed and allotment of roughly 27-28 per cent was made. This success is likely to see many more issues coming in the near future.
Future
This week is action packed and kicks off with results from index heavy Reliance Industries on Monday. Prior to this, with two major announcements by the government, the markets would in all probability open strong and see positive movement at the open.
The first announcement was the allowance of 51 per cent Foreign Direct Investment (FDI) in multi-brand retail against 26 per cent earlier. The second was the green signal given to the largest ever deal valued at US $ 7.2 billion between BP-Reliance deal. This is likely to set the under performing Reliance counter on fire when it opens today. Incidentally the Reliance stock closed at Rs 874 last Friday.
Decision
The Reserve bank of India (RBI) will meet for its review meeting on Tuesday, July 26 and in all probability would raise interest rates once again as inflation rise is still not abating. The July series futures will expire on Thursday, July 28 and the closing level for the June series was 5,647.40 points, which is a mere 13 points lower than current levels.
The results season continues and as expected and written earlier, is showing signs of cost pressures on account of raw materials, interest and some sort of demand slowdown at higher prices. All of this is keeping a tight leash on stock prices and we seem to be moving literally nowhere.
Opening
Coming to this week, we should have a strong opening on Monday and the next few days would be full of action leading to volatility. The BSE Sensex has support at 18,588, then at 18,503, then at 18,374, then at 18,153 and finally at 17,948 points.
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It has resistance at 18,801, then at 18,853, then at 19,015, and then at 19,203 points.u00a0 The NSE Nifty has support at 5,586, then at 5,562, then at 5,511, then at 5,549 and finally at 5,388 points. It has resistance at 5,661, then at 5,684, then at 5,736, then at 5,788 and finally at 5,844 points.
The markets should be strong in the early part of the week followed by profit taking and then global cues and quarterly results would determine the course of the market.
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 https://ak57.in
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