Chiddu's phoren flavour
The finance minister's meeting with foreign investors is the most crucial event to watch out for this week
The markets had a good week and closed at new 52-week highs. The markets had its jitters and after the inflation numbers were released and the possibility of rate cut in the January 29, 2012 RBI meeting receding, markets fell sharply. It was only after the announcement of diesel price hike and moves towards deregulation of diesel prices that market mood turned bullish and the sentiment positive.
The BSESENSEX gained 375.40 points or 1.91 per cent to close at 20,039.04 points while the NIFTY gained 113.10 points or 1.90 per cent to close at 6,064.40 points. The broader indices like the BSE500 and BSE200 and BSE100 gained 1.34 per cent, 1.53 per cent and 1.72 per cent respectively. The BSEMIDCAP was almost flat, gaining a mere 0.12 per cent while the BSESMALLCAP lost 1.13 per cent.
Ups and downs
The top gaining sectors were BSEOIL up 8.91 per cent, BSEREALTY up 7.73 per cent and BSEPSU up 4.67 per cent. The losers were BSEAUTO down 2.88 per cent while BSEMETAL lost 1.44 per cent. The week saw plenty of action and the announcement of increase in diesel prices set the trigger for a smart rally in the prices of all the Oil Marketing Companies.
The top gainers included Indian Oil up 22.95 per cent, BPCL up 16.93 per cent and Hind Petro up 11.34 per cent. ONGC, another beneficiary of the diesel price hike because of a lower subsidy share, was up 15.58 per cent. Other gainers were Reliance up 7.15 per cent, Bharti Airtel up 7.38 per cent and NTPC up 7.67 per cent. Losers included M&M down 5.84 per cent, Wipro down 5.33 per cent, McDowell 4.91 per cent and Jet Airways down 3.81 per cent.
Reliance Industries reported encouraging results on Friday and has been a sharp gainer for the week and also since the share buyback began one year ago. The share gained Rs 122 or over 16 per cent from Rs 777. The company bought back shares worth Rs 3,400 crore in the market buyback and the same has been highly beneficial to shareholders as the market cap has seen a sharp appreciation. It may also be mentioned that the ceiling of the buyback was Rs 870, and the markets have now sustained this price. With the positive news flow on account of results and the diesel deregulation, the stock is likely to record further gains going forward as well.
Arshiya International, the third party logistics player, continued to be at the receiving end and has been locked at lower circuit for eight consecutive days. The share has lost over 72 per cent in value in this time period and closed at just about Rs 49 against Rs 122 when the price fall began. The company is highly leveraged and has long-term debt of Rs 2,250 crore. A conference call held for investors and analysts did not help the company in removing doubts about the company’s performance. The selling on the counter, particularly the sellers at circuit filter, is scary and is unlikely to abate shortly.
Govt’s big plans
The Finance Minister (FM) would be on the road during this week, meeting FIIs in Singapore, Hong Kong, London and Frankfurt. FIIs have been big buyers last year and have become the mainstay of the Indian markets. With almost Rs 5,000 crore invested this week, it would be crucial to see the message given to these investors. The Indian Rupee appreciated 1.81 per cent to close at 53.71. Domestic institutions continued to be sellers during the week and sold shares worth Rs 1,550 crore.
IRFCL (Indian Railway Finance Corporation Ltd) is tapping the markets with its tax free bond issue in two tenures of 10 and 15 years. This offers an attractive investment opportunity for taxable income investors in the retail category at 7.68 per cent and 7.84 per cent for the two tenures. The definition of retail investors is investment of upto Rs 10 lakh.
The week ahead
This week will have two major drivers. The first would be comments by the FM on his road show where he would assure investors of reforms on the fiscal front and containment of subsidies so that there is no downgrade of our sovereign rating.
The second would be the results of the performance for the October– December quarter. The timing of the diesel price change, close on the heels of the railway passenger fare hike, indicates the resolve of the FM to ensure big inflows from FIIs in the markets. So far they have invested over R13,500 crore in the market in the short period of 18 days. Against this backdrop, it makes sense to play the markets on a bullish note especially with the RBI review meeting outcome not clear on whether rates would be cut or not.
The markets are likely to rally in the coming week and one needs to be bullish. The BSESENSEX has support at 19,977 points, then at 19,841 points, then at 19,715 points and finally at 19,561 points. It has resistance at 20,113 points, then at 20,214 points, then at 20,318 points and finally at 20,445 points. The NSENIFTY has support at 6,047 points, then at 6,012 points, then at 5,989 points and finally at 5,935 points. It has resistance at 6,082 points, then at 6,117 points, then at 6,181 points and finally at 6,232 points.
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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