Be safe not sorry

Feb 11, 2013, 07:56 IST | Arun Kejriwal

Trade cautiously, as the market might break its seven-day fall this week but it is doubtful if it can sustain the change

The markets have been falling for the last seven days but are now marginally higher than the beginning of the year. The week saw the BSESENSEX losing 296.42 points or 1.50 per cent to close at 19,484.77 points. The NIFTY lost 95.40 points or 1.59 per cent to close at 5,903.50 points. The broader market lost more with the BSE100, BSE200 and BSE500 losing 1.86 per cent, 1.92 per cent and 2.06 per cent respectively. The BSEMIDCAP and BSESMALLCAP were even bigger losers with losses of 3.04 per cent and 3.72 per cent.

P Chidambaram
Union Finance Minister P Chidambaram announced that the expected GDP for the nation is 5.5 per cent for the year ending March 2013. File pic

The BSEFMCG was the only gainer up 1.73 per cent. The losers included BSEPSU down 4.67 per cent, BSEMETAL down 4.35 per cent, BSEOIL down 3.82 per cent and BSEREALTY down 2.70 per cent. In individual stocks, TCS was up 5.71 per cent, HDFC up 3.72 per cent and Infosys up 0.61 per cent.  The losers included Sterlite Industries down 9.56 per cent, BHEL down 7.48 per cent and Sesa Goa down 7.56 per cent. The markets have certainly turned bearish and, but for the FIIs, one gets a feeling that nobody else is bullish on 

the economy.

Low growth
The Central Statistical Organisation (CSO) has predicted a GDP of 5 per cent for the current year ending March 2013. Post the announcement, the Finance Minister claimed the same would be 5.5 per cent. Where we actually end up is a matter of speculation but the clear fact is that the country is headed for its worst growth in a decade.

Successful sale
NTPC’s Offer For Sale (OFS) was a grand success with the offer receiving bids for 1.72 times the issue size of 78.32 crore. The floor price fixed was Rs 145 and the allocated price was R145.55 and upwards. The government has garnered Rs 11,400 crore from this divestment which takes the total collection to R20,000 crore against the budgeted R30,000 crore. The FIIs were aggressive buyers last week and have bought shares in the OFS of NTPC. The total investment by FIIs in the week was R15,100 crore while domestic institutions sold shares worth R2,050 crore. The Indian Rupee depreciated during the week closing at 53.50 instead of 53.19 against the US dollar in the previous week.

New exchange
On Saturday, the Finance Minister formally inaugurated MCX-SX, the latest stock exchange, in the city. Trading would commence from today on the newest bourse which has the MCXSX40 as its flagship index. The SENSEX has 30 stocks while the NIFTY has 50 stocks and this would be an apt number coming midway between the two at 40 stocks.

The closing level of the MCXSX-40 was 11,419.70 based on Friday’s closing price. The index has a base of 10,000 and has its base date as March 31, 2010. It has 1,116 companies in the ‘permitted to trade’ category. With the equity and derivatives segments set to commence from today, it would be interesting to see how brokers invite business from clients to the new exchange. It is quite clear that for the new exchange to grow, it needs to bring benefits to all its stakeholders be it brokers, clients or corporates.

Coming up
The week ahead sees an IPO from Sai Silk (Kalamandir) Limited, a sari and garment retailer predominantly located in Hyderabad and Bengaluru with some presence in Tamil Nadu. It is launching its issue to garner R89 crore in a price band of Rs 70-75. The issue opens today (February 11) and closes on Wednesday, February 13. The issue has an attractive USP of a ‘safety net’ which allows original retail investors allotted upto 1,000 shares to offer their shares back to the promoter group in a time frame of six months at the original price, if the share trades below the issue price on even a single day.

This is a voluntary safety net offered by the promoter group and would help in instilling confidence in retail investors who have been losing money in almost 75 per cent of the issues which have tapped the capital markets in the last four to five years. I believe this safety net offers an assurance of sorts to the investor giving him an option to reap profits in the market and sell at issue price in case of a downfall to the promoter for a reasonable time of six months from issue. Readers should look at the issue as it seems to be a rewarding one.

The markets have become quite nervous and with a continuous seven-day fall, are likely to break the trend today or tomorrow. However, it cannot be said whether the markets will be able to sustain it or if it will just be a one day wonder. With the budget less than three weeks away, one would look at developments on that front to drive the market, which in turn, is at best likely to drift.

The BSESENSEX has support at 19,383 points, then at 19,298 points, then at 19,150 points and finally at 18,975 points. It has resistance at 19,616 points, then at 19,786 points, then at 19,850 points and finally at 19,975 points. The NSENIFTY has support at 5,873 points, then at 5,845 points, then at 5,803 points and finally at 5,755 points. It has resistance at 5,943 points, then at 6,002 points, then at 6,038 points and finally at 6,084 points. Trade with extreme caution.

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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