Chill out zone

Updated: Dec 26, 2016, 11:07 IST | Arun Kejriwal

Sit back and bask on the sidelines or, head anywhere but to the markets, for it is certainly not the place to be in as the year draws to a close

Prime Minister Narendra Modi at the inauguration of a new campus of National Institute of Securities Markets (NISM) along with (from L) FM Arun Jaitley, Maharashtra Governor C Vidyasagar Rao, CM Devendra Fadnavis and Union Corporate Affairs Minister Arjun Ram Meghwal at Patalganga. Pic/PTIPrime Minister Narendra Modi at the inauguration of a new campus of National Institute of Securities Markets (NISM) along with (from L) FM Arun Jaitley, Maharashtra Governor C Vidyasagar Rao, CM Devendra Fadnavis and Union Corporate Affairs Minister Arjun Ram Meghwal at Patalganga. Pic/PTI

Markets lost ground on the first four days of last week making it seven consecutive days of loss, before a technical bounce on Friday helped markets recover some lost ground. The BSESENSEX lost 448.86 points or 1.69 per cent to close at 26,040.70 points while NIFTY lost 153.70 points or 1.89 per cent at 7,985.75 points. The broader markets saw the BSE100, BSE200 and BSE500 lose 2.09 per cent, 2.245 and 2.27 per cent respectively. BSEMIDCAP lost 3.89 per cent and BSESMALLCAP was down 2.61 per cent.

Indian Youth Congress activists shout anti-Govt slogans and burn an effigy following accusations, from Congress vice-president Rahul Gandhi, that PM N Modi had received ‘black money’. in New Delhi. Pic/AFP
Indian Youth Congress activists shout anti-Govt slogans and burn an effigy following accusations, from Congress vice-president Rahul Gandhi, that PM N Modi had received ‘black money’. in New Delhi. Pic/AFP

Of many losses
There was no sectoral gainer. The one which lost the least was BSEOIL&GAS, down a mere 0.25 per cent. The top loser was BSEHEALTHCARE down 4.25 per cent followed by BSEMETAL 4.22 per cent and BSEBANKEX 2.65 per cent. In individual stocks, the top gainer was GAIL up 3.97 per cent followed by Cipla 2.96 per cent and HDFC Bank 0.46 per cent. The losers were led by Axis Bank down 7.26 per cent followed by State Bank of India 5.86 per cent, Cairn India 4.90 per cent and Bharti Tele 4.66 per cent. PSU banks were losers with Union Bank down 7.75 per cent, Canara Bank 6.72 per cent and Bank of Baroda 4.17 per cent. Dow Jones continued its winning streak and gained 90.40 points or 0.46 per cent to end at 19,933.81 points. The Indian rupee lost six paisa or 0.09 per cent to close at R 67.82.

About the exchequer
The Prime Minister Narendra Modi spoke at the inauguration of National Institute of Securities Markets (NISM) campus near Mumbai on Saturday. He said, “To some extent, the low contribution of taxes may also be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income. I call upon you to think about the contribution of market participants to the exchequer. We should consider methods for increasing it in a fair, efficient and transparent way. Earlier, there was a feeling that some investors were getting an unfair deal by using certain tax treaties. As you know, those treaties have been amended by this government. Now it is time to re-think and come up with a good design which is simple and transparent, but also fair and progressive.”

Quell initial panic
P-notes and GAAR are quite clear. One is not quite sure what he is hinting at but he surely wants more revenue from the markets. STT is already there and dividend distribution tax which is effectively a double tax is also there. Further, entities and individuals who receive more than R 10 lakh as dividend in one year, have been subjected to an additional 10 per cent tax. The presence of the Finance Minister A Jaitely and his Ministers of State as well as the Revenue Secretary Shaktikanta Das makes his comments significant. While this is enough to rattle a market, one needs to follow it up more carefully as the immediate assumption may not be correct.

The pressure shows
December series futures will expire on Thursday, December 29. The previous series had expired at a level of 7,965.50 points. The current close is higher by a mere 20 points and this is after the monthly high for the series was 8275 points. This clearly shows that the month has been under pressure. With four trading days to go, and a lead of merely 20 points, the series could go in either direction. The fact that markets are currently weak and volumes seem to be falling on lack of serious interest in the markets, the pressure would be on bulls. It therefore makes sense that one should sit out rather than trying to squeeze a rupee from the market.

Enjoy the events
To conclude, we are in the festive part of the year drawing to a close and by the time you read this piece, Christmas will be over. The year 2017, will be on us in less than a week. Sit out, chill out and enjoy the events as they unfold. The market is certainly not the best place to be in at this time.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. 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.

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