Momentum is back but it is best to be vigilant and exercise caution
TCS Chief Executive Officer and Managing Director N Chandrasekaran has been named Tata Sons' new chairman after the unceremonious sacking of Cyrus Mistry. Pic/PTI
Markets gained further ground last but not without hiccups. One thing is crystal clear, though they gained, the momentum seemed to be missing. The BSESENSEX gained 478.83 points or 1.79 per cent to end last week at 27.238.06 points. NIFTY gained 156.55 points or 1.90 per cent to end at 8,400.35 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.03 per cent, 1.97 per cent and 2.00 per cent respectively. The top sectoral gainer was BSEMETAL up 5.47 per cent followed by BSEPOWER 4.00 per cent and BSEBANKEX 3.62 per cent. The only loser was BSEHEALTHCARE down 0.23 per cent. Very clearly the gainers outnumbered the losers. In individual stocks, the top gainer was SAIL up 10.98 per cent followed by Hindalco 7.09 per cent, Tata Steel 6.36 per cent and NMDC 5.81 per cent. The losers were led by Dr Reddy’s downed 5.62 per cent, followed by Idea Cellular 5.28 per cent and DLF 1.97 per cent.
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A Wall Street sign on a sidewalk near the New York Stock Exchange. Wall Street opened lower recently, but the Dow Jones Industrial Average remained within shouting distance of the 20,000 mark. Pic/AFP
Completely flat this
Dow Jones was virtually flat losing 78.07 points or 0.39 per cent to close at 19,885.73 points. Clearly 20k is not just a number but is proving to be a real hurdle to cross. The markets have spent more than a month above the 19,750 level but have failed to close above 20k even once. The best they have done so far is 19,974 on December 20. Currently, the 20k mark is like Mount Everest. The Indian rupee lost 19 paisa or 0.28 per cent to close at Rs 68.15.
This week sees the follow on fund offer of CPSE-ETF opening for subscription on Wednesday, January 18 and closing on Friday, January 20. The fund offering is R 6,000 crore with a reservation of R1,800 crores for QIBs. The entire issue thereafter has preference for retail investors. Any unsatisfied portion would then be offered to pension funds and thereafter, if available, to HNIS and QIB Bidders. There is a discount of 5 per cent to all categories of investors.
Stocks that rock
This is a follow on offer and the earlier offer had come in March 2014 and was for 3,000 crore and was oversubscribed about 1.4 times. The basket of 10 stocks is the same as last time and is skewed in favour of energy and oil sectors. This time, this skewed allocation is beneficial, as oil prices have bottomed out and are much more stable unlike last time when they were falling.
Secondly, the fact that there has been a fundamental change in the oil companies post realignment of prices to market driven against the subsidy regime, make this basket attractive.
The present price of the earlier fund was Rs 26.85 as of Friday, January 13. This looks like an attractive investment.
A note of caution however is that this being a mutual fund offer the application has to be made by cheque and not ASBA. Also there is some paperwork to be completed like ‘KYC’ which needs to be done before submitting the application. Do not wait for the last moment for applying in view of these procedures.
The election analysis
The Election Commission has reserved its order in the dispute between the two factions of warring father and son in the Samajwadi party case. Looking at the circumstances of the case and the fact that elections to UP begin on February 4, the probable outcome would be a freezing of the cycle symbol with neither faction getting it.
This would be a blow to both factions considering that rural India still votes by symbol. Who would benefit from this split would be known when results are declared at Holi time in the middle of March.
Results from TCS and Infosys were declared on Thursday and Friday respectively. Both shares lost ground on Friday. TCS was down on a weekly basis while Infosys was marginally up for the week. The sector is under stress and margins are certainly under pressure.
Tatas on track
N Chandrasekaran has been appointed the new chairman of Tata Sons. He would take over from February 21 and would have his job cut out in trying to bring about a functional Tata group after the fall out of the ugly Ratan Tata -Cyrus Mistry public spat. Chandra, as he is popularly known, was heading TCS and is a Tata cadre with 30 years’ experience. He is young, considering he is just 53 and has a long innings ahead of him in his new role. One hopes the group gets back to business as usual now.
Markets are going nowhere even though they have gained in the last week. Its time to be cautious and wait for triggers before re-entering the markets.
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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