Nature is in charge

Jun 15, 2015, 08:23 IST | Arun Kejriwal

All the action on the Nifty and Sensex is being affected by the monsoon which has arrived in Mumbai

The markets seem to be waiting for stability or maybe the monsoon. The rains have hit Mumbai and the inevitable water logging has already begun in Mumbai’s low lying area. The Sensex continued to be volatile and lost 343.19 points or 1.28 per cent to close at 26,425.30 points.

The skies are grey and the scene at Dalal Street is gloomy to match the mood. Pic/PTI
The skies are grey and the scene at Dalal Street is gloomy to match the mood. Pic/PTI

Nifty lost 131.80 points or 1.62 per cent to close at 7,982.90 points. These are new lows made by Sensex and Nifty in the current year. This also means all gains have been erased and we are negative for the year which is about half over. BSE100, BSE200 and BSE500 lost 1.72 per cent, 1.62 per cent and 1.84 per cent respectively while BSEMIDCAP and BSESMALLCAP lost 2.24 per cent and 2.56 per cent.

Losses all around
In sectoral gainers, there were none and BSEBANKEX lost the least at 0.56 per cent. Losers were led by BSE REALTY down 3.98 per cent followed by BSECON DURABLE 3.25 per cent and BSEHEALTHCARE 3.00 per cent. In individual stocks, gainers were led by ICICI Bank up 3.99 per cent followed by Bajaj Auto 3.92 per cent and Tata Power 2.83 per cent.

Losers were led by PSU banks Bank of Baroda 8.81 per cent, PNB 7.72 per cent and Union Bank 6.40 per cent. Other losers included Cipla 6.49 per cent and SAIL 5.49 per cent. Mega merger of Cairn India with Vedanta was announced yesterday where each minority shareholder of Cairn India would be given one share in Vedanta for every share of Cairn India.

Besides this he or she would in a similar ratio get one redeemable preference share of Rs 10 bearing a coupon rate of 7.5 per cent redeemable at par in 18 months as well. The share price of Vedanta on Friday was R 184 while that of Cairn India was Rs 180.75.

There will be reactions to this announcement on Monday when markets open but this was a must do deal as the parent Vedanta has a debt of slightly over Rs 77,000 crores which would be reduced by some R 16,000 crores from the cash on hand that Cairn India has.

In economic news, there was a surge in IIP in April to 4.1 per cent. Consensus estimates were around 1.15-1.25. Consumer inflation rose marginally to 5.01 per cent in May against 4.87 per cent in April. The Indian rupee weakened by 31 paisa or 0.49 per cent to Rs 64.06.

Monsoon rains
FII’s continued to be sellers and sold shares worth Rs 3,158.05 crores while domestic institutions bought shares worth Rs 2,081.68 crores. The continued selling by FII’s is keeping the markets on tenterhooks as is the progress of the monsoon which seemed to be lost somewhere some time ago.

So large is the Indian subcontinent and diverse its weather that where we are talking of a drought like condition in the country, Assam up in the East has been hit by floods. The monsoon has just begun and its early days before the progress becomes a cause for concern. The week sees wholesale inflation and trade date to be released today and the FED meeting tomorrow and on Wednesday.

I had mentioned this meeting as being last week and regret the error. The outcome of this meeting is expected to postpone the increase in interest rates for some time would be a big relief to global markets and would bring stability.

Markets have seen result season coming to an end and would now look at the monsoon and in three weeks’ time start looking at results for the first quarter. It appears the worst is over and things may look up. The markets are interestingly poised and having made new lows are looking for a level to bounce from.

The bounce may happen at any time but very clearly markets have shown their vulnerability and any recovery would be treated as suspect until a base is created. Be cautious in the coming weeks and allow the monsoon to advance all over the country before making any conclusive decision. Man may create anything and everything but nature is supreme.

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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