Awaiting Budget bliss

Feb 02, 2015, 08:07 IST | Arun Kejriwal

The first Modi government presentation of the money allocations in the country is expected to make the Sensex, Nifty skyrocket

The week gone by was super volatile and all the gains of the first three days were wiped out on Friday. The benchmark indices ended the week with losses. Sensex lost 95.89 points or 0.33 per cent to close at 29,182.95 points. Nifty lost 26.70 points or 0.30 per cent to close at 8,808.90 points.

Like he swept polls across India for the BJP, Narendra Modi is hoping for an encore in Delhi, too. Pic/PTI
Like he swept polls across India for the BJP, Narendra Modi is hoping for an encore in Delhi, too. Pic/PTI

BSE100, BSE200 and BSE500 were fairly flat and saw BSE100 lose 0.09 per cent while the other two gained 0.04 per cent and 0.03 per cent. BSEMIDCAP gained 0.40 per cent while BSESMALLCAP lost 0.32 per cent.

The extent of Friday’s fall cannot be gauged with these numbers but when one writes that the Sensex fell 499 point and Nifty 144 points, the rise during the week and the fall thereafter gets amplified.

Top sectoral gainer was BSEREALTY up 8.27 per cent, followed by BSECON DURABLE 3.75 per cent and BSEOIL&GAS 2.44 per cent. Losers were led by BSEMETAL down 3.04 per cent followed by BSEPSU 1.80 per cent and BSEBANKEX 1.17 per cent.

In individual stocks, top gainer was Hind Petro up 13.80 per cent followed by BPCL 10.68 per cent and HCL Tech 8.99 per cent. Other gainers were Jet Airways 18.37 per cent and DLF 8.67 per cent. Losers were led by Union Bank down 16.87 per cent and Bank of Baroda 13.30 per cent. Coal India was down 8.39 per cent and the share was just around the OFS floor price of Rs 358.

January futures expired on a positive note gaining 778.25 points or 9.52 per cent. Open interest for February series was at 17 per cent at R 91,725 crores. It is this sharp build up in open interest which was the undoing of the market on Friday.

Call it global factors or effect of Coal India divestment but the fact remains that large open interest alone was the reason for the fall. Divestment of 10 per cent of Coal India was completed with the help of the friendly insurance company which has invested about Rs 10,000 crores of the total Rs 22,600 crores.

Though it is substantial it still shows that more than half the issue was subscribed by other investors including 2 lakhs retail investors. Shares were allotted marginally higher than the floor price of R 358. With about half the divestment proceeds in the kitty, the government is expected to have on divestment through OFS (Offer For Sale) every week.

Quality of assets and provisions of impairment of assets is the main issue which concerns banks and their stock performance. The difference in valuation of PSU banks and private banks seems to have now become disproportionate and warrants a relook at either of them for being too cheap or too expensive.

Also, the consortium of banks who have lent to large loans which have become sticky sees names of even the private banks appearing, yet the loan book does not reflect the extent of bad and doubtful loans. FIIs were buyers of Rs 6,150 crores for the week and Rs 11,600 crores for January while domestic institutions were sellers of Rs 1,250 crores for the week and buyers of Rs 250 crores.

Dow Jones has seen a sharp correction last week losing 507 points or 2.87 per cent to close at 17,164.95 points. FED in its meeting decided to keep rates on hold for some time and it’s likely that the first rate change may happen in the second half of the calendar year.

Tuesday, February 3 sees RBI meet for its monetary policy review where status quo is expected on rates. The surprise cut in repo rates announced about 10 days ago will suffice till the budget is done away with and directions from the government become clear. Delhi goes to polls on Saturday, February 7 and results would be declared on February 10.

Once the results are known and the two main parties in J&K PDP and BJP have settled the terms of governance we will be beginning the first full budget of the Modi government. A lot is expected like every other budget but many things have already happened which would normally have found place in the budget.

The tax anomalies in the Vodafone case have been settled with the government deciding not to appeal against the
High Court order. The week ahead has an important event on Tuesday in the form of RBI policy where no change is expected. The correction on Friday has tempered expectations further and there would be no impact if status quo is maintained.

If however, Raghuram Rajan decides otherwise there could be fireworks. Expect a volatile week with global markets correcting and our markets likely to take a breather before we attempt to cross Mount Everest at 30,000 on the Sensex in the pre-budget rally.

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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