Multiple factors cause upheaval

Sep 29, 2014, 08:22 IST | Arun Kejriwal

The Mars mission, Narendra Modi in the US and the breaking of BJP-Shiv Sena and Congress-NCP alliances in Maharashtra all affected the markets

The week gone by was eventful and had all the expected news flow. The mission to Mars was successful and India became the first country whose spaceship entered the Mars orbit at first attempt.

The Bombay Stock Exchange (BSE) as seen from St Xavier’s College terrace. Pic/Uday Devrukhkar
The Bombay Stock Exchange (BSE) as seen from St Xavier’s College terrace. Pic/Uday Devrukhkar

The Supreme Court cancelled all but four coal blocks and allowed those in operation to continue mining till March 31, 2015. They would however, have to pay a penalty of R 295 per ton of coal mined since inception.

Political happenings
Prime Minister Modi launched the “Make in India” brand and logo which saw the who’s who of Indian industry assembled under one roof. The two political alliances in Maharashtra BJP-Shiv Sena and Congress-NCP both decided to part ways and contest elections on their own to be held on October 15 in the state.

The week ended with Tamil Nadu CM Jayalalithaa being arrested and jailed in a disproportionate assets case. The markets lost intra-week 870 points on the Sensex and 280 points on the Nifty before the recovery led by S&P upgrading the outlook on Indian economy from “Negative” to “Stable”. The timing of the upgrade is bound to raise eyebrows as it comes on the eve of Modi’s US visit.

The markets closed negative for the week with BSESENSEX down 464.10 points or 1.71 per cent to close at 26,626.32 points. Nifty lost 152.60 points or 1.88 per cent to close at 7,968.85 points. Broader indices saw BSE100, BSE200 and BSE500 lose 2.07 per cent, 2.16 per cent and 2.48 per cent respectively while the BSEMIDCAP and BSESMALLCAP lost 4.50 per cent and 6.08 per cent.

There was just one sectoral gainer in BEFMCG which was up 2.29 per cent. In sectoral losers, they were led by BSEREALTY down 8.21 per cent, BSECAPGOODS down 4.60 per cent and BSEMETAL down 4.11 per cent. In individual stocks, there were few gainer led by ITC up 3.42 per cent and Hind Unilever up 1.90 per cent.

The losers were led by Jindal Steel down 12.82 per cent, BHEL 9.52 per cent and Canara Bank down 8.93 per cent. Heavyweight index shares like Reliance industries were down 6.13 per cent and ICICI Bank 5.86 per cent. All in all it was a free fall and but for the S&P upgrade things would have ended on a very sour note.

September futures
The week saw September futures expire on a negative note and this was the first time after seven consecutive positive expiries. The series ended at 7,911.85 points down 0.96 per cent. The fall in various sectors and stocks particularly in midcap and smallcap gives an indication that valuations were getting stretched and needed to correct quickly.

The week ahead has plenty of new flow and is also a short week. There are trading holidays on Thursday and Friday and the holiday mood continues into the Monday of the following week. All three trading holidays are working days on global markets which makes the market subject to extreme volatility when they close and reopen.

The Indian PM meets President Obama on Monday and Tuesday. The RBI meets for its bi-monthly review on Tuesday and the outcome of the first meet with Obama could impact working on Tuesday. Expectations driving the market on Monday, reality from RBI on Tuesday and finally hard reality on Wednesday after the US visit is over.

Clearly, there is a lot of action expected. After 35 billion from Japan and 20 billion from China, the street believes that US is likely to double the total of these two countries.

Takeover tensions
The hostile takeover of Mangalore Chemicals has entered the last leg with the final offers in place. Deepak Fertilisers has announced a price of Rs 93.60 while Zuari Agro’s final offer is at Rs 81.60. For those who want a better tax efficient manner of selling their shares, as they are subject to long term capital gains, may want to sell the same in the market.

The issue from Momai Apparels Limited is looking to raise Rs 28 crores in a price band of Rs 78-92. The company is a manufacturer of readymade garments and is a subsidiary of Ashapura Intimates Fashion Limited, a manufacturing cum marketing company of leisurewear and lounge wear. The week ahead is short and likely to be choppy. 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

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