Fireworks on Dalal Street

Published: 24 October, 2011 09:22 IST | Arun Kejriwal |

With a 75 minute Muhurat trading session on Wednesday, it will be an action packed week, but truncated due to Diwali holidays

With a 75 minute Muhurat trading session on Wednesday, it will be an action packed week, but truncated due to Diwali holidays

The markets behaved as expected and were extremely volatile last week. We saw movements of 337 points net in a single day, yet the BSE Sensex closed with losses of 297.05 points or 1.74 per cent at 16,785.64 points.

The NSE Nifty lost 82.35 points or 1.6 per cent to close at 5,049.95 points. The broader indices like the BSE100, BSE200 and BSE500 lost 1.77 per cent, 1.73 per cent and 1.61 per cent respectively. The BSE Midcap and BSE Smallcap fared better losing much less at 1.26 per cent and 1.20 per cent respectively. 

Illustration/ Jishu Dev Malakar
Strike affected Maruti Suzuki but it soon recovered after the strike was called off and and was up Rs 64 or 6.23 per cent at Rs 1,092. The other gainer was State Bank, which was up 3.51 per cent. Crompton Greaves was a big loser with losses of 13.97 per cent for the week, while software major lost 7.60 per cent.

Last week there were three new IPOs. Flexituff International, which had issued shares at Rs 155, held ground and closed at Rs 159.35, a gain of 2.81 per cent. Taksheel Solutions had issued shares at Rs 150. It was a complete disaster crashing a substantial 76.13 per cent to close at Rs 35.80. The third company was M&B Switchgear which had issued shares at Rs 186 at a ridiculous price earnings multiple of 480 times. This share gained substantially and closed at Rs 380, a gain of 104.30 per cent. The share had extremely poor fundamentals and the PE at the closing price is now just short of 1000 times. It's a matter of time before the share crashes and investors would do well to simply avoid or ignore this share and not get trapped in the same.

Foreign Institutional Investors (FIIs) and Domestic Institutions were both net sellers during the previous week with sales of Rs 627 crore and Rs 600 crore respectively. Global markets continued their volatile movement and last Friday the US markets rose on expectation that the European crisis would see some resolution. Whether it happens or not, no one is sure, but markets survive on hope and that seems to be in plenty.

The week beginning on Monday, October 24 is going to be action packed. The markets will see a 75-minute "Muhurat" trading session on Wednesday and would be closed on Thursday. Tuesday would see RBI announcing its credit policy and it is widely believed that the interest rates would rise by a minimum of 25 basis points. Inflation seems to be out of control and refuses to come down,which would force RBI to raise rates and there is hardly a chance that the hike maybe 50 basis points. Tuesday also sees the October series expire and as the current close of Friday was quite close to the Nifty expiry of September of 5015.45 points, the volatility on this account may not be severe. The Indian Rupee depreciated sharply and closed at Rs 50.03, which is a thirty-month low.

The markets this week will be volatile and with a two-day midweek holiday, there will be extreme volatility. The European crisis will be at the centre of action and with meetings being planned all throughout the week,  much volatility is expected. There could be a sharp opening (upside or downside) when Indian markets open on Friday after the two-day holiday. It may make sense to square off positions with the expiry on Tuesday and wait for Friday to take fresh positions.

The BSE Sensex has support at 16,681 points, then at 16,573 points, then at 16,401 points and finally at 16,054 points. It has resistance at 16,961 points, then at 17,093 points, then at 17,241 points and finally at 17,612 points. The NSE Nifty has support at 5,018 points, then at 4,987 points, then at 4,936 points and finally at 4,838 points. It has resistance at 5,100 points, then at 5,136 points, then at 5,183 points and finally at 5,285 points.

It would be an action packed short week.

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
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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