Markets began trading for the week on a very strong note

Jul 10, 2017, 10:49 IST | Arun Kejriwal

A trigger may throw up a surprise, though

People clean the street where riots took place after the G20 summit in Hamburg, northern Germany. Fresh clashes erupted early Sunday following the G20 summit end, with protesters setting vehicles on fire. Pic/AFPPeople clean the street where riots took place after the G20 summit in Hamburg, northern Germany. Fresh clashes erupted early Sunday following the G20 summit end, with protesters setting vehicles on fire. Pic/AFP

Markets began trading for the week on a very strong note, gaining about one percent on Monday itself. This helped in maintaining the momentum and the BSESENSEX ended the week with gains of 439.02 points or 1.42 per cent to close at 31,360.63 points. NIFTY gained 144.90 points or 1.52 per cent to close at 9,665.80 points. The broader markets saw the BSE100, BSE200 and BSE500 gain 1.68 per cent, 1.65 per cent and 1.75 per cent respectively. BSEMIDCAP was up 2.03 per cent while BSESMALLCAP gained 2.73 per cent.

Gainers and losers
The top sectoral gainer was BSEREALTY up 5.54 per cent, followed by BSEMETAL 3.41 per cent and BSEFMCG 2.48 per cent. There was only one sectoral loser during the week in the form of BSEIT down 0.48 per cent. In individual stocks, heavyweight Reliance Industries was the top gainer up 8.04 per cent followed by DLF 6.29 per cent and Lupin 5.38 per cent. The top loser was Bajaj Auto down 2.96 per cent followed by Axis Bank 2.48 per cent.

Dow Jones had a small gain during the week, up 64.71 points or 0.30 per cent to close at 21,414.34 points. The Indian Rupee remained relatively stable losing one paisa or 0.02 per cent to close at Rs 64.59.

In primary market news, one saw the listing of GTPL Hathway Limited. It was a quiet listing and the share managed to close above the issue price of R 170. The weekly close was better at R 178.70, a weekly gain of 5.12 per cent.

Merger news
The news of the week was IDFC and Shriram group, the NBFC and truck finance company entering into an agreement to explore the possibility of a merger during a 90-day exclusivity period. The final outcome and ratios are undecided but the counters of these companies would be in the thick of action in the week. Expect both to see substantially higher volumes and interested action. Also, with a 90-day period announced, there would be various combinations and permutations floated and markets would react to the same.

Infosys eye
The results for the quarter April to July would kick off during the week with TCS declaring results on Thursday July 13, followed by Infosys on Friday July 14. Results from these two companies would give very good indications about how this sector is facing and whether the slowdown and visa issues are resolved. One hopes that in the case of Infosys, the issue of back seat driving is also taken care of. There used to be a time when Infosys would kick off the results season and be the first to declare amongst the SENSEX or NIFTY group. They have lost even this position and TCS would be ahead of them. This is possibly an indication of changing times.

Liquidity look
The biggest factor driving markets currently is liquidity. The amount of inflows of domestic mutual funds is far in excess of their best ever and probably even greater than their wildest dreams. With this kind of liquidity and a market which already is expensive, the resultant effect could be explosive. Take the case of recently listed CDSL. This share had listed a week ago and registered impressive gains on debut day in the previous week. The shares were issued at R 149 valuing the company at 18 times historical earnings. Friday July 7, saw the share trade a massive 382.21 lakh shares against an IPO size of 351 lakh shares. The delivery volume was a mere 36.59 lakh shares or 9.57 per cent. The share made an intraday high of R 344.80 and closed at Rs 331.15, a gain of R 37.25 or 12.67 per cent. The share which was issued at 18 times valuation, is now 40 times. The whole valuation feels really expensive and makes one wonder what is happening. If this is entirely because of liquidity, it is dangerous and detrimental to the health of the market. If it is something else, we will learn of it in the coming weeks.

Be careful
Markets recovered ground from the levels where they were stuck over the last five to six weeks. Having recovered ground, they now appear to be out of a dangerous situation where they could slip into serious correction any time soon. In the immediate term, a correction may or may not happen, but with results to be announced, there would always be hope and expectancy in the coming weeks about performance.

Markets would continue to be volatile and present one with ample trading opportunities. Use them judiciously, as the markets are overheated and only need a trigger to turn.

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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