Flurry of worries
China-US equations give rise to uncertainty; global cues unlikely to decide trends
Markets began on a positive note, registering gains when trading began yesterday (Monday). Last week, markets lost ground on the next three days as Friday was a holiday. BSESENSEX lost 476.14 points or 1.34 per cent to close at 34,981.02 points. NIFTY lost 155.45 points or 1.46 per cent to close at 10,526.75 points. The broader indices like the BSE100, BSE200 and BSE500 lost 1.27 per cent, 1.21 per cent and 1.14 per cent respectively. BSEMIDCAP was down 0.78 per cent and BSESMALLCAP lost 0.93 per cent.
The top sectoral gainer was BSEREALTY up 1.64 per cent followed by BSECAPGOOD 0.10 per cent. The top loser was BSEMETAL down 4.26 per cent followed by BSEIT 4.11 per cent and BSETECH 3.60 per cent. In individual stocks, the top gainer was Adani Ports up 5.91 per cent followed by Dr Reddy 5.30 per cent and Zee Entertainment 3.28 per cent. The top loser was India bulls Housing down 7.85 per cent followed by Tata Steel 5.95 per cent, Wipro 5.68 per cent, Hindalco 5.30 per cent and NTPC 5.16 per cent.
Dow Jones was under pressure and lost significant ground, down 1,127.27 points or 4.445, to close at R24,285.95 points. Crude prices continued to fall and are now below the 60 dollar per barrel mark which is a year low price. On the back of fall in crude the India Rupee made a smart recovery and was up R 1.25 or 1.74 per cent to close at R 70.67 to the dollar.
Apple, the I-Phone maker and currently one of the most prized companies in the Dow Jones has had a price range of 150.24 dollars to 233.47 dollars this year. The high was made about a month ago and the share is currently trading at 172.29. The share has lost over 61 dollars in under a month and this is close to 30 per cent. This share is of a company which sells products like telephones, computers and watches. A company that commands global respect may have some serious issues, which probably most people are unaware of. This is not in isolation and there may be some other companies in the same situation as well. The trade war is hurting every country, it is not just China, so, markets are worried.
The next tranche or Follow on Offer of the CPSE ETF opens for subscription today, Tuesday, November 27. The issue size is R8,000 crore and has a green shoe option of 6,000 crore. There is a discount of 4.5 per cent for all investors. Further, there has been tweaking in the composition of the ETF, with construction and renewable energy being introduced for the first time. The current composition has 11 stocks against the earlier 10 with four additions and three exclusions. Public sector companies are high dividend paying companies and the dividend yield of public sector companies is between 3-4 times that of the NIFTY average. With low valuations and reduced interest in PSU shares currently, this offer looks attractive.
The days ahead sees November futures expire on Thursday, November 29. The current value of NIFTY of 10,526.75 points means that the bulls have a lead of 401.85 points or 3.97 per cent. It is enough for the current moment and gives the bulls the leeway to pull this series through. They can afford to lose a hundred points daily and still survive. Incidentally, in the previous week even though bulls lost on three of the four trading days they were able to contain the losses at 155 points. This time around, they have four trading days and 400 points to defend and should be able to pull of the series.
Over the last few weeks I have been advocating buying on dips and selling on rallies. The strategy has worked so far. Going forward, it may not work and I am therefore modifying the same. Any weakness in the markets could see a selling spree and markets reeling under pressure. While this would be a buying opportunity, at this time it is difficult to say how much the fall could be. The strategy therefore becomes sell on rallies and let falls stabilise. With expiry coming up in three days, markets would remain volatile. Global cues are likely to decide trends which are currently unclear. Falling crude prices and appreciating rupee are big positives. Trade cautiously.
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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