Good days are here

Jun 09, 2014, 08:26 IST | Arun Kejriwal

The markets are seeing huge positives with new highs being achieved thanks to the work done by Prime Minister Narendra Modi

The markets were on a roll and hit their lifetime highs last Friday, surpassing the intraday highs made on May 16 when the Lok Sabha election results were announced. The markets are clearly excited about the way the new PM is going about his job.

Tattoo artist Nikhil Sachdeva inks a portrait of Narendra Modi on the arm of author and scriptwriter Chandra Mehendrou in Mumbai. Pic/AFP
Tattoo artist Nikhil Sachdeva inks a portrait of Narendra Modi on the arm of author and scriptwriter Chandra Mehendrou in Mumbai. Pic/AFP

Gains galore
The BSESENSEX gained 1,179.12 points or 4.87 per cent to close at 25,396.46 points. Nifty gained 353.45 points or 4.89 per cent to close at 7,583.40 points. The BSE100, BSE200 and BSE500 gained 5.29 per cent, 5.36 per cent and 5.54 per cent respectively. The real gains were witnessed in the BSEMIDCAP and BSESMALLCAP which gained 7.46 per cent and 8.41 per cent.

The top gainer in sectoral indices was BSEREALTY up 12.34 per cent followed by BSEMETAL up 11.50 per cent and BSEPSU up 11.09 per cent. BSEOIL&GAS was another start performer up 10.44 per cent. There was only one loser in BSEIT down 0.64 per cent and in a week when everything was a sharp gainer you could say that BSEHEALTHCARE which gained a mere 0.18 per cent was also a loser.

In individual stocks, ONGC was the star up a staggering 22.67 per cent followed by Union Bank up 22.66 per cent and BPCL up 20.33 per cent. Other gainers included Hero Moto up 14.46 per cent and Hindalco up 14.35 per cent. There were few losers and they were mainly from the IT and healthcare pack. HCL Tech lost 6.28 per cent followed by Dr Reddy down 4.04 per cent and TCS down 2.81 per cent.

Bull Run
India is one of the top performing markets globally having gained about 20 per cent in just over five months of the current year. The bull run began sometime before the assembly elections in December 2013 and they have just not stopped thereafter. The way of working of PM Narendra Modi seems to have taken many people by surprise.

Global cues saw Dow Jones close at a new all-time high of 16,901.81 points, a gain of 184.05 points or 1.10 per cent. The Indian rupee was marginally down at R 59.17, losing 7 paisa. FIIs have turned very bullish and in the last couple of days have invested just under half a billion dollars. Fresh paper in the form of QIP (qualified institutional placement) has begun and good companies are able to raise money quite easily.

At a recent CII conference in Mumbai last week, SEBI chief made it very clear that public shareholding for all listed entities should be at the minimum 25 per cent level and this should be irrespective of who the promoter is. This comment has certainly come with the consent of the government and indicates that there would be divestment of government stake in the near future.

It also puts at rest the sham manner in which divestment was done last year where cross holdings were created and government dominated companies like IOC saw a part of their stake being bought by ONGC and OIL India.

All this is poor corporate governance and is not liked by FIIs who are our key investors today and going forward. Looking at the solid performance of Gujarat based state PS’s one can expect significant turnaround or improvement in performance of these units and substantial value unlocking for shareholders.

RBI policy
The Reserve Bank of India (RBI) policy was a status quo for key rates except SLR (Statutory Liquidity Ratio) which was cut by 50 basis points to 22.5 per cent. This week will see trade data in India for May being announced on June 10 while consumer inflation and industrial production data will be announced on Thursday.

Irrespective of the numbers, markets would remain buoyant. This momentum would see markets peaking around budget time which is roughly a month away. This does not suggest that markets would rise every day but the general trend would be upwards and markets positive.

Retail investors after being on the sidelines for a long time have finally entered. There are plenty of stocks which offer value and decent returns even at these levels. I believe the PSU stocks which are there offer decent value even at these levels and it would be worth the while of investors to look at these stocks. We are in new territory and it does not make sense to give targets of resistance and support.

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

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