Ebb and flow

Published: 29 October, 2012 07:23 IST | Arun Kejriwal |

There were undulations and lots happening throughout last week

The markets moved up and down on alternate days and ended weaker. They gained on Monday and Thursday and lost on Tuesday and Friday. Wednesday was a holiday on account of Dusshera. Markets seem to have tired and are now waiting for a big reason to rally. In the absence of any such trigger they are likely to continue drifting with a negative bias. The BSE SENSEX lost 56.97 points or 0.30 per cent to close at 18,625.34 points. The NSE NIFTY lost 19.95 points or 0.35 per cent to close at 5,664.30 points. The broader indices like the BSE100, BSE200 and BSE500 lost more at 0.55 per cent, 0.63 per cent and 0.63 per cent respectively. BSE MIDCAP lost 1.03 per cent while BSE SMALLCAP lost 1.16 per cent.

Fall from grace: New York, UNITED STATES: Former head of global consulting firm McKinsey & Co. and former director at Goldman Sachs Group, Rajat Gupta (C) leaves federal court with his lawyer Gary Naftalis after his sentencing for passing secrets he learned, while serving on the board of directors of Goldman Sachs. Pic/AFP 

Amongst the sectoral indices, BSE CAP was the top performer gaining 2.34 per cent followed by BSE AUTO up 0.39 per cent. The BSE BANEX was fairly volatile with sharp two-sided moves but managed to close marginally higher with gains of 0.18 per cent. The losers included BSE FMCG down 3.01 per cent, BSE REALTY down 2.38 per cent and BSE PSU down 1.52 per cent. In individual stocks, the top gainers were capital goods maker Larsen and Toubro up 4.47 per cent, Axis Bank up 2.58 per cent and ICICI Bank up 2.08 per cent. The losers were led by IRB Infra down a staggering 18.62 per cent, PNB down 8.88 per cent, PFC down 8.23 per cent and FMCG giants ITC down 3.88 per cent while Hind Unilever lost 2.63 per cent.

The week had plenty of news flow and kept the market fairly active and volatile. Citibank chief Vikram Pandit was forced to resign. Rajat Gupta was sentenced to two years in prison and a $ 5 million fine for his insider trading case. CESC acquired First Source in an all cash deal and saw the shares of CESC crash from Rs 339.05 to Rs 281.05, a fall of Rs 58 or 17.11 per cent as the market believed the acquisition had no synergies. The happenings in Delhi seem to be getting dirtier by the day and the electronic media is now at the centre of attention with allegations and counter allegations. One is not sure when and how the same would end but it is certainly not a happy state of affairs.

The Indian Rupee appreciated marginally to Rs 53.56 against Rs 53.84 in the previous week. FIIs were neutral in the week with their net purchases reducing to a trickle at just fewer than 10 crore for the week. Domestic institutions continued to be sellers and sold stock worth Rs 492 crore.

The results season continued with a mixed bag. Hind Unilever reported results, which saw their net profit rise 17 per cent to Rs 807 crore. While the results were good, the markets did not like the fact that volume growth was a mere 7 per cent and the share on Friday post the results fell Rs 12.05 or 2.14 per cent. Punjab National Bank (PNB) reported results where their net profit has fallen to Rs 1065.58 crore against Rs 1205.03 crore in the year ago quarter. Net NPAs have risen sharply and also quadrupled from Rs 2088 crore in the September 2011 quarter to Rs 7883 crore. The Net NPA as a percentage of the loan book has over the same period increased sharply from 0.84 per cent to 2.69 per cent.

In the case of ICICI Bank, one finds that the net NPAs for the quarter ended September 2012 have increased insignificantly to Rs 10,036.37 crore, against the year ago figure of 10,021.25 crore. One finds it quite interesting and intriguing to find such variance between the PSU Banks and the Private Banks. Yet another matter of concern is that with industry in general presenting a picture of strain and stress in the economy and finding it tough, the results from these private banks give an impression that economy is booming. While it may suit the government's agenda in painting a rosy picture of the economy and the markets also at a decent level, one wonders what reality is. I believe a few more months would be needed to resolve this issue and solve the riddle.

Tuesday would see the RBI presenting its mid-quarter review of the monetary policy. It is widely believed that there could be a small change with the Repo rate or CRR rate being cut by 25 basis points. The street has factored in such a cut and it appears that there would be some token action taken by RBI. I believe that the most likely outcome would be a 25 basis points cut in CRR and Repo remaining unchanged. This could see the Bankex and Bank Nifty take a beating.

The recent change in Portfolios and impact on their ministries would take time to happen but it is expected that a sense of direction prevail to bring in new and young blood into the cabinet. The BSE SENSEX has support at 18,525 points, then at 18,465 points, then at 18,375 points and finally at 18,263 points. It has resistance at 18,717 points, then at 18,772 points, then at 18,888 points and finally at 19,055 points. The NSE NIFTY has support at 5,638 points, then at 5,602 points, then at 5,582 points and finally at 5,550 points. It has resistance at 5,693 points, then at 5,709 points, then at 5,749 points and finally at 5,789 points. It would be a difficult week ahead with key levels of support at 18,525 on the Sensex and 5,630 on the Nifty to be critical. Similarly, resistance levels would be 18,825 and 5,725 respectively. Markets are likely to be under pressure as the week progresses.

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

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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