Keep it constant
Markets gain in reaction to unchanged interest rates
The week gone by was one where the RBI (India), FED (US) and ECB (Europe) banks had their review meetings. All of them decided to keep interest rates unchanged. There was a knee jerk reaction to this in Europe on last Thursday, but the same was more than made up on Friday when markets gained in Europe and US. The markets in India gained across the board and closed with decent gains. The BSE SENSEX gained 354.74 points or 2.13 per cent to close at 17,197.93 points. NSE NIFTY gained 115.85 points or 2.27 per cent to close at 5,215.70 points. The broader indices gained a little more with the BSE100, BSE200 and BSE500 gaining 2.40 per cent, 2.52 per cent and 2.55 per cent respectively.
The sectoral gainers included BSE CAPITAL up 4.70 per cent, BSE REALTY up 4.38 per cent and BSE IT up 2.44 per cent. There were no losers and the lowest gainer was BSE METAL was 0.08 per cent. In individual stocks, the top gainers were IRB Infra up 10.62 per cent, IVRCL up 9.92 per cent, BHEL up 7.88 per cent and REC up 7.04 per cent. The losers included Coal India down 2.76 per cent, Hero Honda down 2.39 per cent and Tata Communication down 1.65 per cent.
There was enough of news flow last week with The Children's Fund of the UK filing a suit against Coal India in the Delhi High Court. The fund is the largest public shareholder with 1 per cent of the total holding or 10 per cent of the public float. The case is against the government order of rolling back prices, which is being objected to by the fund. Incidentally, as mentioned above Coal India was the biggest loser last week.
Deccan Chronicle was in the news for having pledged its promoter holding. More than 90 per cent of the promoter holding is pledged and there is controversy about the pledging with Karvy, who is the demat depository stating that there has been fraud committed with a bogus letter being submitted by the company. The company has also in the last month, taken loans of about Rs 1,500 crore from private lenders. The share has been at the receiving end and has lost Rs 5 or 26.95 per cent to close at Rs 13.55. This share would continue to be in the news for some more time.
BSE, which recently celebrated 137 years has been losing market share on a consistent basis. Recently, they launched a recalibrated BSE 100 by dividing its value by 1.6 times and brought it to a similar level as the NIFTY. The volumes in the futures and options on this product has risen manifold and last week, the BSE share of turnover had improved dramatically to around 40 per cent market share from under 15 per cent. This week today, they are launching a new product "Cash Futures Spread" which would offer under one window an opportunity to earn a spread between cash and futures. The success of this product would boost the fortunes of the exchange significantly and help in reviving the fortunes of the company.
FIIs were big buyers last week and bought stock worth Rs 3,154 crore. Domestic institutions were sellers and sold stock worth Rs 504 crore. The Indian Rupee depreciated marginally and closed the week at Rs 55.77. The Government has officially declared India as drought hit and this is certainly going to affect agriculture production in the country. This in turn would put pressure on the GDP and even 6.5 per cent, looks almost impossible this time around.
In India the government has finally fixed the reserve price for spectrum sale at Rs 14,000 crore for 5 Mhz of nationwide spectrum for GSM players and Rs 18,200 crore, for CDMA players. One third of the auction amount is to be paid upfront and the balance in 10 annual installments after a two-year moratorium. The spectrum usage fee of 3-8 per cent, as at present would continue. This appears a very positive decision taken by the government and the same is confirmed with the posturing by telecom companies.
The week ahead would be choppy and fairly lacklustre but with a positive bias. The BSE SENSEX has support at 17,080 points, then at 16,980 points, then at 16,899 points, then at 16,755 points and finally at 16,607 points. It has resistance at 17,261 points, then at 17,353 points, then at 17,443 points, then at and finally at 17,530 points and finally at 17,726 points. The NSE NIFTY has support at 5,180 points, then at 5,145 points, then at 5,115 points, then at 5,072 points and finally at 5,031 points. It has resistance at 5,235 points, then at 5,265 points, then at 5,295 points, then at 5,342 points and finally at 5,381 points. Trade cautiously.
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
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.