Iffy about the Cliff-y
The fiscal cliff in the US saw markets getting weak and surrendering gains
The Lok Sabha and Rajya Sabha passed a number of bills, which included the Banking, Insurance and Companies Amendment Bills. Markets were doing quite well for themselves until Friday, when concerns about the ‘fiscal cliff' in the US saw markets turning weak and surrendering all the gains over four days and closing negative for last week. The BSE SENSEX lost 75.25 points or 0.39 per cent to close at 19,242 points. The NSE NIFTY lost 31.90 points or 0.54 per cent to close at 5,847.70 points. The BSE100, BSE200 and BSE500 lost 0.30 per cent, 0.27 per cent and 0.26 per cent. BSE MIDCAP was almost flat losing a mere 0.02 per cent, while BSE SMALLCAP lost 0.38 per cent. The sectoral gainers included BSE METAL up 4.44 per cent, BSE HEALTH up 0.97 per cent, BSE AUTO up 0.81 per cent and BSE IT up 0.59 per cent. The losers included BSE CAPITAL down 1.95 per cent, BSE OIL down 1.23 per cent and BSE REALTY down 0.90 per cent. RBI kept interest rates unchanged at the credit review and BSE BANEX lost 0.80 per cent.
In individual stocks, the gainers were Tata Steel up 8.13 per cent, JSW Steel up 7.92 per cent, Hindalco up 7.63 per cent and REC up 5.81 per cent. The losers included Jet Airways down 6.99 per cent, J&K Bank down 4.68 per cent, Titan down 3.07 per cent and Larsen and Toubro down 2.99 per cent. The market had its fair bit of news flow throughout the week. It was initially news from Parliament, then the credit policy from RBI, then election results from Himachal Pradesh where Congress won the elections and then Gujarat where BJP won the elections under Narendra Modi for a third consecutive term, falling marginally short of a 2/3rd majority. The concern about ‘Fiscal Cliff' in the US saw markets globally cooling off. The DOW closed the week with minor gains of under half a percent.
The week ahead has a trading holiday today on account of Christmas. Thursday sees the expiry of December futures. The current value of the NIFTY at 5,847 points is a mere 22 points higher than the current months open and would therefore not cause any sharp movements when expiry does happen three days later. FIIs continued their buying spree and bought shares worth Rs 4,591 crs during the week while domestic institutions were net sellers of Rs 816 crs. The Indian Rupee depreciated to Rs 55.06. Gold prices fell in India and were also weak globally. There have been a number of OFS (Offers For Sale) issues from companies to adhere to the minimum 25 per cent public shareholding. The week saw issues from Reliance Power, Adani Enterprises and Eros International. SEBI has set a deadline for June 2013 and is very clear that they would not extend the same.
One will see three companies, which had tapped the capital markets recently listing their shares. Wednesday would see CARE listing its shares followed by PC Jeweller on Thursday and Bharti Infratel on Friday. CARE issue was very well received and the issue was priced at Rs 750 per share. It would be fair to presume that with the grey market premium and the fact that all retail applicants have received 20 shares each and that also by way of lottery, means that the issue is likely to trade at a price of around Rs 900 on listing. PC Jeweller has issued shares at Rs 135 per share with a discount of Rs 5 per share to retail. The issue was subscribed about seven times and is likely to trade in a range of Rs 140-150. The third issue is the difficult one where Bharti Infratel issued shares at Rs 220 with a discount of Rs 10 to retail investors. The issue was subscribed by QIBs alone and remained undersubscribed by HNIs and retail. The issue from the parent Bharti Airtel also traded at a discount when they tapped the capital markets 10 years ago and it took the company roughly 18 months to come back to a premium. It appears history will repeat itself and one should not be surprised that in course of time, the stock trades at a discount of over 25 per cent to its issue price.
This week is likely to be dominated by news from global markets more than anything else. US markets will lead the set the trend as to how markets perform. Critical levels for our market would be 19,600 and 5,975 on the upside and 19,100 and 5,800 on the downside. The possibility of the market correcting in the next week seems greater than gaining ground.
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
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