Cautious is the way to trade
While P Chidambaram continues his global tour, the increased volatility seen in the markets last week is expected to continue this week too
The week was extremely volatile and began with a fall of more than 2 per cent on the very first day. It more than recovered the fall on Wednesday with a gain of almost 2.5 per cent. Why the fall and why the rise is still not clear, but what is clear is the fact that at these new levels, volatility increases. The BSESENSEX gained 163.80 points or 0.81 per cent to close at 20,286.12 points.
The NSENIFTY gained 80.05 points or 1.31 per cent to close at 6,187.30 points. The broader indices gained similarly with the BSE100, BSE200 and BSE500 gaining 1.31 per cent, 1.32 per cent and 1.24 per cent respectively. The BSEMIDCAP gained 1.24 per cent while BSESMALLCAP struggled to gain 0.21 per cent.
The BSEREALTY was the top gainer up 5.93 per cent. Other gainers included BSECAP up 4.30 per cent, BSEBANKEX up 4.09 per cent and BSEHEALTH up 2.92 per cent. The losers were led by BSEFMCG down 2.93 per cent. Other losers included BSECON down 2.12 per cent, BSEIT down 1.82 per cent and BSEAUTO down 0.59 per cent.
The top gainer in individual stocks was LICHSG up 10.44 per cent. Other gainers included PNB up 8.02 per cent, ICICI up 5.22 per cent and SBI up 5.16 per cent. The losers were led by ITC down 5.64 per cent, IGL down 4.56 per cent and Titan down 4.53 per cent. The government has allowed the presence of call and put options in private equity deals. This would reduce litigation and encourage more such deals to happen in the future.
Finance Minister P Chidambaram is on his three-nation tour of France, UK and Qatar where he sells the India investment story to FIIs. Friday also saw a sharp spurt in the capital goods sector and this could have been on the back of the FM meeting businessmen and bankers in various Indian cities trying to understand the status of stalled projects and to revive the same.
The Wholesale Price Index (WPI) fell for the third consecutive month to 4.89 per cent against 5.96 per cent. This is the lowest number in the last three and a half years and has increased the expectation of yet another rate cut in the mid-quarter review in June from RBI. Bond yields have also fallen in expectation.
FIIs were big buyers during the week and bought stock of Rs 4,750 crore while domestic institutions sold shares worth Rs 1,360 crore. FIIs have already invested over USD 2 billion in the current month. The Indian Rupee depreciated marginally to 54.88 against the US Dollar compared to 54.80 in the previous week.
Standard & Poor’s has confirmed India’s sovereign rating at BBB- (triple B minus) with a one in three chance of a downgrade in the next 12 months. The government has been trying to convince the agency of the proactive steps taken to reduce the fiscal and current account deficits.
This week sees an offer for sale from Just Dial which plans to raise Rs 822 crore - 950 crore in a price band of Rs 470-543. The issue has a reservation of just 10 per cent for retail investors who are being offered a discount of Rs 47 on the issue price. There is also a safety net for them which would allow them an exit at investment value if the price falls.
The issue is extremely expensive when compared with its peers like Infoedge, the owners of the website Naukri, and is about 50 per cent more expensive. There would be some speculative interest in the share considering that the issue requires a mere 64,000 applicants in the retail category at the minimum lot of 25 shares for the retail portion to be oversubscribed. Readers may apply for the issue only if they are looking at a speculative punt.
This week is expected to be volatile and it looks like the market will take direction from global markets and the FII activity. Bond yields would also be a driver as the rate cut would be widely looked forward to. It may be mentioned that though RBI has cut rates on three occasions in the past three reviews it has not translated into any meaningful reduction in interest rates whatsoever.
Key levels for the SENSEX are 19,650 and 20,450 while similar levels for the NIFTY are 5,960 and 6,270 respectively. The BSESENSEX has support at 20,184 points, then at 20,011 points, then at 19,849 points and finally at 19,655 points. It has resistance at 20,357 points, then at 20,527 points, then at 20,668 points and finally at 20,854 points. The NSENIFTY has support at 6,155 points, then at 6,101 points, then at 6,038 points and finally at 5,970 points.
It has resistance at 6,209 points, then at 6,265 points, then at 6,302 points and finally at 6,342 points. It would be a very choppy week ahead, hence trade cautiously.
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 http://ak57.in
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