And it all fell down

Jun 17, 2013, 06:54 IST | Arun Kejriwal

The week gone by was a chaotic one for the markets and it is expected that they will perform poorly this week too

The markets gained in the beginning of the opening day but surrendered almost all the gains by the end of the day. While that was expected, the next three days were carnage on the bourses. The SENSEX hit a low of 18,765 and the NIFTY 5,683. Friday was a different day altogether with the markets gaining close to 1.9 per cent.

Customers look at gold jewellery at a shop in Allahabad. Gold jewellery manufacturers have been adversely affected by the Reserve Bank of India's decision to forbid the purchase of gold with loan and other non-cash payment options. Pic/AFP

The week ended with losses: the BSESENSEX lost 251.30 points or 1.29 per cent to close at 19,177.93 points, while the NSENIFTY lost 72.6 points or 1.23 per cent to close at 5,808.40 points. The broader indices lost more with the BSE100, BSE200 and BSE500 losing 1.86 per cent, 2.06 per cent and 2.15 per cent respectively. The BSEMIDCAP lost a substantially higher 3.24 per cent while the BSESMALLCAP lost 3.18 per cent.

The fall was widespread across sectors and there was just one gainer. BSEOIL gained 0.67 per cent. The losers were led by BSECONSUMER down 10.72 per cent. Other losers included BSEMETAL down 5.47 per cent and BSEREALTY down 4.83 per cent. The top gainer in individual stocks was Reliance Industries up 3.69 per cent.

Other gainers included NTPC up 2.43 per cent, Hindalco up 1.77 per cent and Wipro up 0.61 per cent. The losers were led by Apollo Tyres, which fell 28.81 per cent after they acquired Cooper Tyres. Other losers included Titan Industries down 17.46 per cent after RBI clarified that all domestic consumption of gold for jewellery purposes have to be paid for only in cash. Other losers included Wockhardt down 12.64 per cent, Tata Coffee down 26.45 per cent and Jindal Steel down 13.21 per cent.

New ratings
Though there was a very sharp recovery on Friday, it has been able to only influence the benchmark indices and it needs to be sustained for any meaningful recovery to happen. The week had plenty of action on various fronts. Global rating agency Standard & Poor's retained the outlook and rating at negative while Fitch Ratings retained the rating and revised the outlook upwards. WPI or wholesale inflation for April 2013 fell from 4.89 per cent in March 2013 to 4.70 per cent.

IIP or industrial production numbers for the month of April were at 2.3 per cent (after being revised twice during the day from 2 to 2.2 and then to 2.3 per cent) against 3.4 per cent in March 2013. The Indian Rupee after touching 58.99 against the US dollar, recovered to close at 57.51. FIIs were big sellers in the equity market with net sales of R2,516 crore and a staggering R9,450 crore in the debt market. Net sales in the current month of June in the debt segment are R15,328 crore. Petrol prices were increased from yesterday by R2 per litre purely on account of the sharp depreciation of the rupee. This would have its effect on inflation numbers next time around.

Stake sale
The Offer For Sale (OFS) from PSU MMTC was completed during the week at a floor price of R60, which was at a discount of 72 per cent of the market price on the previous day. Post the issue, the stock has been locked at the lower circuit and is destined to do so for the next couple of weeks till the market price of R171.35 corrects to the selling price of R61. The buyback offer form Unilever will open on Friday, when a massive R29,000 crore will flow into the country. The parent would acquire 22.52 per cent of the company at R600 per share.

Gold pains
RBI is scheduled to review its monetary policy today. Considering the various data available, it appears that the RBI is unlikely to make any changes this time around. The RBI has also ruled that gold can be purchased for domestic consumption only if it is paid for fully in cash. It has banned the purchase with loan, lease or any other form. This has affected gold companies engaged in manufacturing jewellery. Companies such as Titan, TBZ and PC Jewellers lost between 14 per cent and 18 per cent. It is expected that RBI may come down on the schemes for buying gold jewellery launched by these companies in its review meet today.

Coming up
The week is likely to see some bounce and recovery before the fall continues. Outcome of the RBI meet is the key event for this week, and it being almost a foregone conclusion that the meeting is unlikely to bring about any changes in the rates, the markets would look for different cues. Friday’s rally is nothing more than a technical bounce and it will fall again in a day or two. Use
all rallies to exit long positions and build shorts.

Key levels for the SENSEX are 18,850 and 19,450 while similar levels for the NIFTY are 5,720 and 5,970 respectively. The BSESENSEX has support at 19,015 points, then at 18,895 points, then at 18,765 points and finally at 18,665 points. It has resistance at 19,276 points, then at 19,418 points, then at 19,585 points and finally at 19,711 points The NSENIFTY has support at 5,758 points, then at 5,705 points, then at 5,670 points and finally at 5,610 points. It has resistance at 5,858 points, then at 5,910 points, then at 5,972 points and finally at 6,015 points. Trade cautiously.

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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