Arun Kejriwal: Course and cause for concern
Challenges mount as we go into a key month where history may repeat itself; or events forge a new path
Markets were down sharply on Thursday and rose even more on Friday. The difference was that Thursday was the last day of June Futures and Friday was the first day of July futures. This recovery though was not enough for markets to close in positive territory for the week. BSESENSEX lost 266.12 points or 0.75 per cent to close at 35,423.48 points. NIFTY lost 107.55 points or 1.00 per cent to close at 10,714.30 points. The broader market saw the BSE100, BSE200 and BSE500 lose 1.13 per cent, 1.31 per cent and 1.48 per cent respectively. BSEMIDCAP was down 2.52 per cent while BSESMALLCAP lost 3.17 per cent.
The top sectoral gainer was BSEIT, up 2.13 per cent followed by BSETECK 1.84 per cent and BSEFMCG 0.74 per cent. The top loser was BSEOIL&GAS down 5.32 per cent followed by BSEREALTY 3.96 per cent and BSEAUTO 3.51 per cent. In individual stocks, the top gainer was Bharti Infratel up 5.11 per cent followed by Infosys 4.67 per cent and Hindalco 3.49 per cent. The top loser were the oil marketing companies led by Hindustan Petroleum down 20.03 per cent followed by Bharat Petroleum 14.68 per cent, Tata Motors 14.43 per cent and ICICI Bank 9.20 per cent.
The Indian Rupee continued to be under pressure and lost further ground. The rupee was down 63 paisa or 0.92 per cent at Rs 68.47 to the dollar. Dow Jones was under pressure to and lost 309.48 points or 1.28 per cent to close at 24,271.41 points.
Our markets had made a high on January 29, and have been under pressure since then. There has been recovery in the benchmark indices but not the midcap and Smallcap indices. The BSESENSEX is of the highs by a mere 2.88 per cent which was at 36,443.98. NIFTY similarly is off by 4.27 per cent. BSEMIDCAP is off by 18.58 per cent with the high being 18,321.37 points. BSESMALLCAP is off by 25.89 per cent with the high being 20,183.45 and current value at 16,032.15. Dow Jones is off by 9.66 per cent. The significance of these numbers is the difference in performance of the benchmark indices and that of the mid and small cap indices.
In primary market news, the issue from auto component maker Varroc Engineering Limited had opened for subscription during the last week and was subscribed 3.59 times. QIB's subscribed their portion 9.16 times while HNI's did it 2.45 times. Retail portion as undersubscribed at 0.95 per cent while Employee was similarly undersubscribed at 0.65 times. One wonders why such experienced and intelligent merchant bankers kept the issue closing day on June futures expiry. Market mood and falling market had a dampening effect on subscription. June futures expired on a negative note and the series lost 147.05 points or 1.39 per cent to close at 10,589.10 points.
Monday would see the listing of two primary market issues. The first is from the Railways, RITES which was subscribed over 67 times. The second issue which also was an offer for sale from speciality chemical company Fine Organics Limited was subscribed under 9 times. The listing of these two companies would be interesting to follow as the government offering was very well priced and left something for the investor on the table. The second issue was richly valued and left virtually nothing on the table. Their success or otherwise will be a learning curve for merchant bankers going forward.
Every July over the last 11 years, markets have gained. Will 2018 see history repeat itself or create history? In 2017, NIFTY gained 665 points, while in 2016 the gain was 700 points. Looking at geo political cues and Dow Jones, it's difficult to imagine at this point. This pointer would however be interesting to watch as the month unfolds.
Markets are very precariously poised at this point of time. The happenings last week on Thursday and Friday give rise to a lot of questions about the trend of the markets. Rising crude prices, depreciating rupee, likely escalation of trade wars and a not too happy Dow Jones are reasons for concern. The fall in midcap and smallcap going forward if any, would offer buying opportunities for investors. Use any dips to buy.
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.
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