Back to its best

Jul 21, 2014, 08:05 IST | Arun Kejriwal

The Union budget and BRICS meet have helped the Sensex and Nifty improve their levels

The markets rallied from the correction which began two weeks ago as last week saw them regain a lot of lost ground. The BSESENSEX gained 617.21 points or 2.47 per cent to close at 25,641.56 points while the Nifty gained 204.30 points or 2.74 per cent to close at 7,663.90 points. The broader indices like the BSE100, BSE200 and BSE500 fared even better gaining 3.00 per cent, 3.08 per cent and 3.15 per cent respectively.

The markets are seeing many positive signs propelling them. Pic/Bipin Kokate
The markets are seeing many positive signs propelling them. Pic/Bipin Kokate

Profits and losses
BSEMIDCAP and BSESMALLCAP rallied even further gaining 4.25 per cent and 5.09 per cent respectively. In individual sectors the top gainer was BSECAPGOODS up 6.62 per cent followed by BSEMETAL at 6.54 per cent and BSEBANKEX 6.44 per cent. There was just one loser in BSEFMCG which was down 0.07 per cent while BSEIT rose the least at 0.23 per cent.

In individual stocks, the top gainer was Tata Steel up a staggering 12.19 per cent followed by Hindalco 10.87 per cent, IDFC 10.52 per cent and Axis Bank up 9.91 per cent. The other gainers included MCX up 15.22 per cent and Deepak Fertilisers 16.31 per cent. The losers were few and were led by REC down 5.06 per cent. The other loser was HindUnilever down 2.95 per cent.

In global news, there was the incident of bringing down a Malaysian Aircraft over Ukraine and killing all 295 people on board. The incident came after the US increased sanctions against Russia on account of taking over Crimea. The world markets had reacted negatively to these incidents but soon recovered. The Dow gained 156.37 points or 0.92 per cent to close at 17,100.18 points close to its all-time high.

Inflation factor
The government has things moving in its favour with inflation at the retail and wholesale levels reducing for June. While retail inflation fell to 7.3 per cent, its lowest level since 2011, wholesale inflation fell to 5.4 per cent against 6.0 per cent. Trade data for June showed that the deficit has increased to $ 11.76 billion from $ 1.23 billion a month ago.

On the positive side is the fact that exports have risen 10.2 per cent compared to a year ago to $ 26.48 billion. What is surprising is the fact that gold imports have risen 65 per cent to $ 3.12 billion. The reduction in import duty on gold widely expected seems to be some time away with these numbers of trade data.

The Union budget has been debated and passed within eight days of being presented. This sure must be a record and one must remember that there were no day long adjournments and no simple voice vote in the din which was then passed. This time there was a proper debate and then the passing. This change in functioning augurs well for democracy and common citizens of this country.

Results season continues and the performance of companies indicates that probably the worst is behind us. TCS and Reliance Industries both turned in decent set of numbers and while TCS has already reacted positively to the same, Reliance is yet to react as the same were declared on Friday.

BRICS model
The proposal to set up a BRICS bank is a welcome step and augurs well for the emerging economies of India and Brazil. The BRICS nation (Brazil, Russia, India, China and South Africa) have agreed to set up a bank to be located in China and India chairing the same for the next six years. This bank would be modelled on the lines of the World Bank and would help the member nations obtain funding on favourable terms.

FIIs were net buyers and in the week gone by invested Rs 2,525 crores while domestic institutions too were buyers worth Rs 1,780 crores. RBI made an announcement regarding loans to the infrastructure sector wherein there would be no CRR or SLR provisions to be made in case the bank funds long term durations. This announcement helped banks to be gainers during the week and helped in an all-round recovery in the markets.

It appears the recent high and lows of 26,200 and 24,900 on the Sensex and 7,800 and 2,425 on the Nifty look unlikely to be under any threat currently. The expiry of July futures is still some time away and with FIIs continuing to be buyers of the India growth story and domestic institutions having stopped to be sellers, there seems to be more demand than supply of paper.

While companies are raising money and having their placements subscribed the elusive first IPO of the season is yet to happen. I believe markets will remain in a buoyant mood and continue to move forward. The time to invest for returns over the next three years is certainly there and in case you were hesitant to enter earlier and did not do so, it’s never too late. Invest now for returns which will beat the rate of inflation and still better fixed deposits.

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

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