Auguring well for the markets

Aug 18, 2014, 07:45 IST | Arun Kejriwal

Efforts to kick-start the economy are showing results, and the PM’s speech definitely helped

THE week gone by saw the markets gaining on every single day and the BSESENSEX gained 774.09 points or 3.06 per cent to close at 26,103.23 points while the Nifty gained 223.15 points or 2.95 per cent to close at 7,791.70 points. The indices are quite close to making new lifetime highs once again.

ARE THE CLOUDS LIFTING? The Bombay Stock Exchange may be seeing the last of negativity. PIC/BIPIN KOKATE
ARE THE CLOUDS LIFTING? The Bombay Stock Exchange may be seeing the last of negativity. PIC/BIPIN KOKATE

The broader markets saw the BSE100, BSE200 and BSE500 gain 2.68 per cent, 2.49 per cent and 2.25 per cent respectively. The BSEMIDCAP gained 0.51 per cent while the BSESMALLCAP lost a tad at 0.04 per cent. The top sectoral gainers were BSEAUTO up5.175 followed by BSEHEALTHCARE 3.57 per cent and BSEOIL&GAS 3.17 per cent. There was just one loser in BSEREALTY down 1.64 per cent. The other sector which just managed to close positive was BSEPOWER up 0.10 per cent.

In individual stocks the top gainer was Tata Motors up a staggering 11.92 per cent. The company reported an excellent set of numbers from its overseas unit JLR (Jaguar Land Rover) which reported an over three fold increase in net profits from R 1,726 crore to R 5,398 crore for the June quarter. The other gainers were HDFC up 9.65 per cent and Bharat Petroleum 8.22 per cent. The three oil marketing companies or OMCs have all reported profits for the quarter on the back of substantial drop in under recoveries. Petrol prices have been market driven for a long time and diesel prices are almost there. Probably a month or two would see them at market prices. There is a loss in the case of LPG and kerosene which is shared by the oil companies and the government. This turnaround will help the OMCs in two ways as they will be able to return the bank borrowings which was funding their losses and the interest cost was further crippling the performance. With loans being returned, they would save on interest which would improve profits. The losers were led by BHEL down 4.08 per cent and State Bank of India down 2.19 per cent. Other losers included J&K Bank down 5.22 per cent and Bhushan Steel down 26.83 per cent. The share is now at R 160 while at the beginning of the month it was at R 400. The company intends to get shareholder approval to raise one billion dollars and one wonders what this is for.

Friday was India’s 68th Independence Day and saw PM Modi make an address to the nation from the rampart of Red Fort. The speech of about 66 minutes was extempore and was inspiring. One can go on and on and discuss the good and the bad of this speech till he makes the next one in 2015, but there were two key takeaways for the market. The first was the massive financial inclusion programme announced where the people would have a bank account and an insurance policy. The second was the phrase “Make in India” which emphasises that India would become a global hub for manufacturing. Once things are manufactured, without doubt they would be consumed, but this would provide jobs to millions and automatically ensure FDI and improvement in infrastructure as new factories would be built. These two takeaways augur well for the market and one should not be surprised if in the coming week we see a new high on the indices.

FIIs continued to be buyers and bought shares worth R 2,144 crore while domestic institutions bought shares worth R 548 crore. The Indian rupee gained 38 paise or 0.62 per cent to close at R 60.76. The Dow Jones closed at 16,662.91 points, a gain of 108.98 points or 0.65 per cent.

The Indian economy has certainly bottomed out and the efforts being made to kick-start it have started showing positive sign. Inflation has peaked out and it should be a matter of time before we see prices softening. With RBI too giving indications that rate cuts are possible and a GDP of 5.5 per cent achievable, it all seems set for a steady progress. Market valuations currently have factored in all these visible signs but have not valued the improved performance that the companies will report. The next rise which will take a longer time will come on the back of improved performance more than anything else. The stable government, a mandate to rule has all been discounted in the 30 per cent rise since February 2014.

If you are an investor and would like to make money in the markets, you need to build a portfolio right away. Invest in companies which have a successful business and have been making money regularly. It’s fine if the last few years have been stressed. Over-leverage is bad and will always remain so and is visible in some companies. Ride the rally as it happens and look to a brighter and happier India as she enters her 68th year.

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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