Don't slip on dips

Updated: Jun 10, 2019, 07:56 IST | Arun Kejriwal | Mumbai

Action-packed week as we head into choppy days

People make offerings and perform prayers to appease the rain god at a temple in Koppal District, some 300 km from Bangalore. Pic/STR /AFP
People make offerings and perform prayers to appease the rain god at a temple in Koppal District, some 300 km from Bangalore. Pic/STR /AFP

Yet another eventful week ended with the benchmark indices making lifetime highs. BSESENSEX lost 98.30 points or 0.25 percent to close at 39,615.90 points while NIFTY lost 52.15 points or 0.44 percent to close at 11,870.65 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 0.52 percent, 0.59 percent, and 0.68 percent respectively. BSEMIDCAP lost 1.26 percent and BSESMALLCAP lost 1.41 percent.

The top sectoral gainer was BSECONSUMER DURABLE up 3.00 percent followed by BSEMETAL 0.21 percent and BSEFMCG 0.12 percent. The top sectoral loser was BSEOIL&GAS down 3.23 percent followed by BSEHEALTHCARE 2.00 percent and BSEREALTY 1.74 percent. In individual stocks, the top gainer was Coal India up 4.60 percent followed by Bharti Infratel 3.08 percent and Hero Moto 2.98 percent. The top loser was GAIL down 13.16 percent followed by Bank of Baroda 9.01 percent and Aurobindo Pharma 7.90 percent.

High eye

The net change for the week does not give the sense of trading volatility that happened during the week. The high made during the week was 40,312.07 points and the low 39,279.47 points. The swing was 1,033 points and the close reflected a mere change of 98 points. Similarly, on the NIFTY, the high was 12,103.05 points and low 11,769.50 points, a range of 334 points and the net change 52 points.

Dow Jones had a stellar week with it gaining a massive 1,168.90 points or 4.71 percent to close at 25,983.94 points. The expectation is that US FED is willing to cut interest rates repeatedly to inject growth in the economy. The Indian Rupee gained 21 paisa or 0.30 percent to close at R 69.47 to the US Dollar.

In limbo

It is on the NBFC front that not much has happened and while the contentious circular struck down by Supreme Court maintains its spirit, the same looks mildly different in reading. The crux of the problem being faced by NBFC's is that they have been lending to riskier propositions and charging higher rates of interest and trying to maximise profits. In this process they have been taking risks far greater than what even banks would take when lending to lower rated borrowers. When issues emerge in the market place, it first affects the lower rated clients and this is what has happened.

Another issue that has cropped up with the housing finance NBFCs is their exposure to bulk loans and developers. With a slowdown in the realty space, they are stuck with no rotation of their loans and the developer not able to pay up as he is does not have sales of property. It truly is a 'catch 22' situation.

The rains

A piece of good news for the market it that monsoon has hit Kerala coast on Saturday. It would take maybe 10 days to hit Mumbai, but it is now on course. The progress of the monsoon would now be a talking point and one would see the electronic media using this as a discussion point on a daily basis. On business television it would be common for the anchor to discuss the monsoon and what sectors would benefit if the monsoon is normal or not normal.

This week we should see markets remaining choppy and volatile. There would be sharp bouts of rise and fall as a significant segment of people believe everything is priced in and there is no reason for markets to rise. When there is buying, this leads to short covering and bulls have their say. Similarly, when nothing happens and markets become listless, they tend to fall. This is when bears take the upper hand. This would continue with markets remaining in a broad range. Buy on dips and sell on rallies. There will be plenty of such opportunities.

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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