Monsoon prediction changes the game

Apr 18, 2016, 08:51 IST | Arun Kejriwal

The last week saw huge gains, with the weather bureau’s prediction of good rainfall doing the trick at Dalal Street

The short three day week had a brilliant move and markets rallied strong. The biggest driver was the forecast released by the Indian Meteorological Department (IMD) which predicts a normal monsoon.

The RBI governor has indicated that he is open to more rate cuts, provided the monsoon is on track. Pic/Datta Kumbhar
The RBI governor has indicated that he is open to more rate cuts, provided the monsoon is on track. Pic/Datta Kumbhar

Sensex rose 952.91 points or 3.86 per cent to close at 25,626.75 points, while Nifty gained 295.25 points or 3.91 per cent to close at 7,850.45 points. BSE100, BSE200 and BSE500 gained 3.76 per cent, 3.61 per cent and 3.53 per cent. BSEMIDCAP gained 3.04 per cent while BSESMALLCAP gained much less at 2.61 per cent.

In sectoral gainers, the top performer was BSEAUTO gaining a massive 7.36 per cent followed by BSEBANKEX 4.79 per cent and BSEPOWER 4.01 per cent. There were no sectoral losers. In individual stocks, Tata Motors rose 9.77 per cent followed by Maruti 8.92 per cent, BHEL 8.90 per cent and ICICI 8.85 per cent. Losers were led by Coal India at 1.27 per cent followed by NMDC 0.93 per cent.

Gaining spree
The sheer magnitude of stocks which gained was massive and their rise spectacular, one had to search for losers. This was because of the IMD prediction that said, there was 33 per cent probability that rainfall would be between 96-104 per cent, a 16 per cent probability that rainfall would be between 104-110 per cent and a 17 per cent probability, it would be between 90-96 per cent.

This augurs well for India and the market liked it. They responded well and rose sharply. The rain god seems to be smiling on India.

The Indian rupee weakened 17 paisa or 0.26 per cent to close at R 66.64 to the US Dollar. Dow Jones gained 104.71 points or 0.59 per cent to close at 17,897.46 points. The week ahead has a trading holiday on Tuesday.

The IPO from Equitas Holdings Limited would be listing on April 21. The company had received excellent response for its issue and is one of the 10 companies which has been given a licence to set up a small finance bank. The company is currently into micro-finance, home loans and vehicle finance. The issue price band was Rs 109-110.

Rate cut hopes
Raghuram Rajan has indicated, he is open to more rate cuts going forward provided the monsoon is on track. This was liked by the market as it makes the intent of the governor clear. The concern is on the food inflation front. If the rains are on track, food availability would improve further and inflation drop.

Markets with sharp upturn last week have become technically strong and generated a buy signal because of a technical breakout in many stocks. Readers would recall that Indian markets were open on January 1 and China hit global markets on Monday. The high on January 1 was 26,197.27 points before China reduced the Sensex to 25,623.35 points at the end of Monday, January 4. We are exactly there and if we have a couple of days of further gains, the markets would see a lot of money pouring in.

Infosys has kicked off result season with a great set of numbers which has beaten the street expectations. It has guided for a revenue growth of 11.5 per cent -13.5 per cent for the coming year. This positive set of numbers will see Infosys shares open with a huge gap today.

This week would see volatile movement with results pouring in. The positive announcement of rain forecast could be tempered with muted results and cues from global markets. One needs to be careful with the markets as they would attempt to make new ground. Trade cautiously.

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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