A fluid situation
Stay safely on the banks and do not let the buying boat enter some very choppy waters
Finance Minister Arun Jaitley with Securities and Exchange Board of India (SEBI) chairman Ajay Tyagi after their meeting in New Delhi over the weekend. Pic/PTI
Markets were under severe pressure and were extremely volatile as well. They lost ground on four of the five trading days. The BSESENSEX lost 1,060.99 points or 3.12 per cent to close at 34,005.76 points. NIFTY lost 305.65 points or 2.92 per cent to close at 10,454.95 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 2.43 per cent, 2.04 per cent and 1.61 per cent respectively. BSEMIDCAP and BSESMALLCAP gained 0.36 per cent and 1.79 per cent.
The top sectoral gainer BSEREALTY up 2.08 per cent, followed by BSEHEACARE 1.95 per cent and BSEPOWER 0.12 per cent. The top loser was BSECAPGOOD down 3.63 per cent followed by BSEBANKEX 3.56 per cent and BSEIT 3.12 per cent. In individual stocks, the top gainer was Cipla up 6.88 per cent followed by Sun Pharma 5.41 per cent and Dr Reddy 3.33 per cent. The top loser was Yes Bank down 7.51 per cent, followed by HDFC 7.31 per cent and Larsen & Toubro 6.40 per cent.
The Indian Rupee lost 34 paisa or 0.53 per cent to close at Rs 64.40 to the dollar. Dow Jones was on a roller coaster ride and lost 1,330.06 points or 5.5 per cent to close at 24,190.90 points. With this loss, they are off by 2,426 points from the intraday high of 26,616 points made on January 26, 2018. The fall last week has brought Dow Jones into negative territory for the calendar year 2018.
Reserve Bank of India (RBI) had its monetary policy review on Wednesday and decided by a 5-1 vote to keep policy rates unchanged. The dissenting vote was in favour of raising rates and signalled a change in stance from a dovish stand to a hawkish one. Considering the way US markets are reacting to rising interest rates and the volatility in bond yields, one can expect rates to rise sooner than later. Monsoon would be a crucial factor and a good monsoon would be a key to keeping food inflation under check. Crude oil prices have risen and were becoming a cause for concern but the recent cool-off in crude prices have provided some relief.
The primary market sees an issue in the healthcare space from Aster DM Healthcare Limited, which is in the business of running hospitals, clinics and pharmacies in the GCC and India. The company has 19 hospitals, 98 clinics and 206 pharmacies, the bigger part of which is in the GCC and the smaller part in India, primarily in Southern India. Total revenue for the company is R 5,931 crore and a profit after tax of R 266.7 crore. The EPS for the year ended March 2017 is Rs 4.28 which values the company at a PE multiple of 44.29-44.39 based on March 2017 numbers.
The company in terms of revenues is a close second to the Apollo group of hospitals. The issue which opens on Monday, February 12 and closes on Thursday, February 15 has a price band of R 180-190. The issue consists of a fresh issue to raise Rs 725 crore and an offer for sale of 1.34 crore shares. With GCC operations being well set and fairly matured, the focus of the company is in India where the opportunity seems to be ever expanding. The company has a total of 4,754 beds and besides setting up new hospitals, is also looking at the acquisition route to grow faster.
It has been decided that Indian stock indices would not trade overseas as they currently do in Singapore and Dubai. The exchanges would give notice and close down trading within six months. This is to ensure that liquidity from India is not sacrificed to trading overseas. This move would ensure that in the longer-term trading volumes in India would increase and the pressure that Singapore Nifty exerted on our markets would cease to happen. This augurs well for Indian bourses and one would see higher volumes and better price discovery in future as well.
Markets are still trying to find a base and would need quite some time to do so. The silver lining, of course is the fact that results seem to be on a better trajectory for now. The last week of results season is on and quite a few biggies would be declaring results in the next five days. Valuations have eased off, results are better but the mood is depressed with Long Term Capital Gains (LTCG).
The Dow behaving in the manner it is, is adding to the concern for the investor. In such a scenario, it makes sense to allow the markets to consolidate, find some levels where they are able to sustain themselves and then build on a portfolio. Currently things are very fluid and hence markets are choppy. With Tuesday being a holiday, expect market participants to end Monday with a neutral stance and take positions only on Wednesday morning. Stay on the sidelines and attempt to buy only on extremely compelling reasons.
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.