Global scenario results in super volatile phase that is likely to continue

Apr 09, 2018, 12:18 IST | Arun Kejriwal

Global scenario results in super volatile phase, which is likely to continue through the week and is a big reason for worry

Customers look at Tesla cars in Hangzhou in China. China is ready to pay any cost in a trade war after Donald Trump threatened an additional $100 billion in tit-for-tat tariffs on Beijing.  Pic/AFP/China OUT
Customers look at Tesla cars in Hangzhou in China. China is ready to pay any cost in a trade war after Donald Trump threatened an additional $100 billion in tit-for-tat tariffs on Beijing.  Pic/AFP/China OUT

Trading for the first week of the new financial year 2018-19 ended on a positive note. The BSESENSEX gained 658.29 points or 1.96 per cent to close at 33,626.97 points. NIFTY gained 217.90 points or 2.11 per cent to close at 10,331.60 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 2.35 per cent, 2.60 per cent and 2.76 per cent respectively. BSEMIDCAP was up 3.82 per cent while BSESMALLCAP was up 4.97 per cent.

The top sectoral gainer was BSEAUTO up 5.32 per cent followed by BSEHEALTHCARE 3.86 per cent and BSEPOWER 3.07 per cent. There was just one loser in BSECONDUR down 0.31 per cent. In individual stocks, the top gainer was Tata Motors up 10.00 per cent followed by Aurobindo Pharma 10.08 per cent, Lupin 9.14 per cent and Bosch 8.57 per cent. The top loser was Bharti Tele down 3.50 per cent followed by HCL Tech 1.78 per cent and Axis Bank 1.74 per cent. Dow Jones was extremely choppy and saw sharp movements. It lost 170.36 points or 0.71 per cent to close at 23,932.75 points. The Indian Rupee gained 20 paisa or 0.31 per cent to close at 64.97.

Four score
There were four issues which listed last week but unfortunately the tone of them was by and large negative. The first to list was Sandhar Technologies Limited which had issued shares at Rs 332. The share debuted with gains but selling pressure saw the share close with losses at Rs 322, down 2.85 per cent. Weekly close was up 2.80 per cent. Shares of Karda Construction Limited listed with losses of 20 per cent on day one. The company had issued shares at Rs 180. They recovered some of the losses and closed for the week at Rs 165.2 down 8.19 per cent.

The third share was ICICI Securities which issued shares at Rs 520 and had a disastrous debut losing Rs 75 or 14.4 per cent. The loss during the week increased marginally and the share closed at Rs 440.60, a loss of 15.27 per cent. The final share to list was Mishra Dhatu Nigam Limited which had issued shares at R 90 and remained unchanged. At the end of the week the same was at Rs 90.25, a gain of 0.28 per cent.

Looking ahead
In the week ahead, shares of Lemon Tree Hotels Limited would list on the bourses. The response from non-institutional investors was poor and the issue in both HNI and Retail categories remained undersubscribed. QIBs who had subscribed to the issue need to turn buyers on day one, otherwise the share could suffer losses.

CEO of ICICI Bank Chanda Kochhar is in the thick of controversy regarding impropriety and quid pro quo issues involving Videocon and her husband’s renewable energy firm. Her brother-in-law runs an advisory firm which has dealings which coincidentally have borrowed from ICICI Bank. He has been questioned over the last three days and advised not to leave the country without information/permission.

There was a whistle blower’s complaint about the wrong doings in the above matter. One wonders what the need was to give a clean chit without hiring the services of an outside agency and having the issue examined. The clean chit by the board puts the onus on the board members and effectively, makes them liable for any action that may be subsequently taken on the CEO.

Boiling point
Last week saw the monetary policy committee meet for its review and it kept key interest rates unchanged on expected lines. Markets have turned super volatile on trade wars between US and China. There can be no winner in this conflict and it is harmful to all. Volatility on this count has ensured that traders are worried about carrying positions overnight as markets open gap-up or gap-down on a regular basis.

The benchmark indices are lower by about 8 per cent from the highs of January 29, 2018 while Dow Jones is 11 per cent lower. Markets are likely to gain in the coming week but will continue to remain volatile. To trade wars, we have a local flavour, ICICI Bank, which has been added to the same. This would keep the pot and markets boiling. Investors should use dips to build a portfolio or buy shares while traders should avoid overnight positions.

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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