Lo(w) and behold

Aug 26, 2013, 02:07 IST | Arun Kejriwal

A sharp fall and then some recovery tells the currency story

The markets fell for the first three days last week and created a new low for the calendar year, 2013. The low on the SENSEX was 17,759 and that on the NIFTY was 5,254 points. Earlier lows were made in April, at 18,144 and 5,477 points. After making new lows the markets rallied sharply and almost made up the weekly losses but still closed lower by about half a percentage point.

Drop down:The rupee, staged a sharp recovery against the dollar as state-run banks, reportedly sold dollars to take the pressure off the rupee. On August 22, the rupee slumped to its all time low of 65.56. PIC/AFP

The BSESENSEX lost 78.74 points or 0.42 per cent to close at 18,519.44 points. The NIFTY lost 36.10 points or 0.66 per cent to close at 5,471.75 points. The broader indices like the BSE100, BSE200 and BSE500 lost slightly more at 0.68 per cent, 0.85 per cent and 0.85 per cent respectively. The BSEMIDCAP lost 1.48 per cent while the SESMALLCAP lost 0.42 per cent. The top gainer amongst sectoral indices was BSEMETAL, which gained 12.41 per cent. The other gainers were BSEIT up 1.36 per cent and BSEPSU up 1.11 per cent. The losers were led by BSEHEALTHCARE down 3.61 per cent. Other losers included BSEREALTY down 3.18 per cent, BSEFMCG down 2.75 per cent and BSECONDURABLE down 2.53 per cent.

In individual stocks, the biggest gainer was Tata Steel up 20.06 per cent. Others included MCX up 20.16 per cent, Jindal Steel up 12.83 per cent, Hindalco up 11.04 per cent and BHEL up 9.58 per cent. The biggest loser was Bharti Airtel, down 8.11 per cent. Other losers included NTPC down 7.59 per cent, Axis Bank down 6.92 per cent and Sun Pharma down 6.41 per cent.

The crisis at National Spot Exchange Limited (NSEL) is looming larger day by day, and while in the previous week about half the money as per the planned pay-out was received, in the second week, the amount received was a mere 5 per cent of the scheduled amount. One fails to understand where the money has gone, and why Govt. agencies, till date are just tolerating the lame excuses offered by the board of the beleaguered exchange. The entire board must be immediately superseded, and put under a government appointed administrator. One fails to comprehend as to why the shares of Financial Technologies, which derives substantial revenues and almost 75 per cent of its profits from the now closed down NSEL, are still trading at R 134.25.

The Indian rupee lost sharply during the week, to touch Rs 65.56 before recovering to close last week at Rs 63.20. The weekly loss was Rs 1.54 or 2.5 per cent. FIIs were big sellers during the week and sold shares worth Rs 2,900 crore, while domestic institutions bought shares worth Rs 2,400 crore. There is concern about the Quantitative Easing, and there is a certainty that the same it will start in September, but clarity on how quickly it could end, is yet to emerge. This saw global markets under pressure and Dow Jones closed with a weekly loss of 0.5 per cent.

The Indian banking sector has been under a lot of pressure, and private banks have lost a lot of ground. ICICI bank fell from Rs 1235 to Rs 790, while Axis Bank fell from Rs 1550 to Rs 945. Yes Bank which is in the centre of a court battle fell even more, from Rs 545 to Rs 220 and closed at Rs 259.25. The company had done a Qualified Institutional Buyer (QIB) in 2010, at a price of Rs 270, and is now trading even below that price. The EPS has from March 10 moved up from Rs 15.65 to Rs 36.53 in March 2013, while the price is back to March 2010 levels. I believe that the controversy and banking sector is strained due to the economy, apart from this, shares have been hammered more than required, and can be looked by medium term investors.

The Finance Minister (FM) has been maintaining that the Current Account Deficit (CAD) will be maintained at 70 billion dollars, but what would the currency be at that time, is not mentioned. At a conversion rate of 58, it translates into a deficit of R 4.06 lacs, while at a rate of 65 it means a deficit of R 4.55 lacs. The FM along with the 70 billion figures needs to specify the currency rate at which he is assuming the deficit.

This week sees August series futures expiring on Thursday, August 29. Previously in July, the series was at a level of 5,907.50 points, a loss of 435 points or 7.96 per cent. There will be an attempt to cover up as much of the losses as possible, which will keep the markets choppy. The markets would provide sharp two sided moves in the week. Having recovered sharply from new yearly lows and the recovery being sharp would make the markets due for a downward correction. Key levels for the SENSEX are 17,800 and 19,100 while they are 5,250 and 5,605 for the NIFTY. The support for the SENSEX is at 18,304, then at 18,135points, then at 17,950 points and finally at 17,755 points. It has resistance at 18,640 points, then at 18,818 points, then at 18,976 points and finally at 19,155 points. The NIFTY has support at 5,406 points, then at 5,310 points, then at 5,215 points and finally at 5,065 points. It has resistance at 5,387 points, then at 5,496 points, then at 5,565 points and finally at 5,608 points. The week ahead would be extremely volatile with expiry and a currency behaving the way it is. 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 prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk. 

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