Fall of gloom
Some recovery could not offset the decline and now all eyes are on the Rupee
The markets fell on expected lines for the first two days and then there was a recovery on last Wednesday, which lasted just for a day. The markets continued to fall for the remaining two days as well. The BSE SENSEX lost 331.07 points or 1.68 per cent to close at 19,429.23 points. The NSE NIFTY lost 104.95 points or 1.75 per cent to close at 5,881 points. The broader indices lost less with the BSE100, BSE200 and BSE500 losing 1.50 per cent, 1.34 per cent and 1.22 per cent respectively. The BSE MIDCAP lost a mere 0.02 per cent while the BSE SMALLCAP gained 0.32 per cent.
The fall was widespread across sectors and there were just two gainers. BSE IT gained 1.20 per cent, while BSE HEALTH gained 0.51 per cent. The losers were led by BSE CONSUMER down 4.04 per cent. Other losers included BSE AUTO down 2.46 per cent and BSE BANKEX down 1.93 per cent. The top gainer in individual stocks was Glaxo Pharma up 5.07 per cent.
Other gainers included JSW Steel up 5.26 per cent, J&K Bank up 4.67 per cent and the software company Wipro up 2.77 per cent. The losers were led by Titan Industries down 7.21 per cent after the government raised the customs duty on gold by 2 per cent to 8 per cent. Other losers included Jet Airways down 7.53 per cent, Tata Communications down 6.45 per cent and IOC and Sesa Goa down an identical 5.48 per cent.
The Indian Rupee seemed to be the culprit for the market fall. The Rupee breached past the 57 level and closed at Rs 57.06 after briefly touching 57.20 levels. The net loss for the Rupee was Rs 0.56 or just about 1 per cent. The FII inflow which was the saving grace for the market seems to have slowed down considerably with net inflows being a mere Rs 871 crore. The concern was from the outflow in the debt market where FIIs sold worth Rs 5,880 crore in the first four days.
They have been net sellers now for the last 12 trading sessions. Domestic institutions in the equity market were net sellers of Rs 157 crore. Japan has been at the receiving end and the NIKKEI lost 897 points or 6.51 per cent at 12,877 points. The Dow Jones closed positive for last week, on a strong showing last Friday when it gained 1.38 per cent and thus closed with a weekly gain of 133 points or 0.9 per cent at 15,248 points.
Shares of Just Dial listed on last Wednesday and have made decent gains for its investors. The issue price was Rs 530 and it closed at Rs 647 up 22 per cent on last Friday. Retail investors were offered a discount of Rs 47, which made their effective price Rs 483. Based on this price, retail investors who were allotted 25 shares each by way of lottery have gained over 33 per cent. One would hope that with this kind of success many more issues waiting on the sidelines may look at tapping the capital markets.
Customs duty on gold was raised by 2 per cent to 8 per cent. This would increase the temptation to smuggle gold. The raise in customs duty saw a corresponding increase in local gold prices, which reached a seven-week high. These prices were again influenced by the twin event of rupee depreciation and customs duty hike. Petrol and diesel prices were also raised and it appears more is likely in the second fortnight of June.
This week would be dominated by the direction of the rupee and the action from FIIs. The fall in crude oil prices has been more than offset by the weak rupee and does not augur well for either our CAD (current account deficit) or the fiscal deficit. Global cues would not affect us much as domestic events would overtake them. The RBI review meet happens on Monday, June 17 where current events and the situation indicate that there would be no change.
The week is likely to see some bounce and recovery before the fall continues. Key levels for the SENSEX are 19,250 and 19,750 while similar levels for the NIFTY are 5,835 and 6,015 respectively. The BSE SENSEX has support at 19,313 points, then at 19,210 points, then at 18,999 points and finally at 18,798 points. It has resistance at 19,635 points, then at 19,742 points, then at 19,942 points and finally at 20,191 points The NSE NIFTY has support at 5,843 points, then at 5,795 points, then at 5,742 points and finally at 5,688 points. It has resistance at 5,945 points, then at 6,019 points, then at 6,072 points and finally at 6,113 points. 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