Not for weak hearts

Updated: Nov 14, 2016, 10:51 IST | Arun Kejriwal |

Demonetisation resulted in chaos, and, concerns about Donald Trump’s surprise election to US presidency took the world by storm

Belagavi: Prime Minister Narendra Modi being welcomed on his arrival at KSRPTC Helipad in Belagavi, Karnataka. His demonetisation move which caught everybody unawares, has set the markets hopping adding to concerns in an uncertain global climate. Pic/PTI
Belagavi: Prime Minister Narendra Modi being welcomed on his arrival at KSRPTC Helipad in Belagavi, Karnataka. His demonetisation move which caught everybody unawares, has set the markets hopping adding to concerns in an uncertain global climate. Pic/PTI

The last week was choppy and not for the faint hearted. Prime Minister Narendra Modi took the nation by storm and caught the market unawares with his move to demonetise currency notes of R 500 and R 1,000 with effect from midnight November 8. The US had begun voting and the next President would be known in about 16-20 hours from then. What happened next was complete chaos at the markets.

The markets saw the BSESENSEX lose 1,800 points intraday while the NIFTY lost 540 points. Closing was much better with markets recovering about 80 per cent from the lows. Thursday was a day of recovery and Friday yet another day of losses on account of currency woes.

It figures
The week ended with BSE SENSEX down 455.33 points or 1.67 per cent to close at 26,818.82 points. NIFTY lost 137.45 points or 1.63 per cent to close at 8,296.30 points. The broader markets saw the BSE100, BSE200 and BSE500 lose 1.70 per cent, 1.92 per cent and 2.04 per cent respectively. BSEMIDCAP lost 2.92 per cent and BSESMALLCAP was down 3.05 per cent. The top sectoral gainer was BSEMETAL up 5.04 per cent followed by BSEBANKEX 3.78 per cent and BSEPSU 3.61 per cent. The top sectoral loser was BSEREALTY down 10.94 per cent followed by BSECONDUR 7.92 per cent, BSEAUTO 5.72 per cent and BSEIT 5.47 per cent.

The top gainer in individual stocks was Punjab National Bank, up 18.28 per cent, followed by Bank of Baroda 12.81 per cent and State Bank of India 12.37 per cent. The top loser was DLF down 16.58 per cent followed by Maruti 10.13 per cent, TCS 9.66 per cent and Mah & Mah 9.52 per cent.

Trump stumps
In what is being termed as an upset, Donald Trump was elected the 45th President of the United States of America. Global markets had taken a beating when Trump was leading in the election and they fell on November 1 in USA and November 2 in India. The Dow is now at a life time high and closed with gains of 959.38 points or 5.36 per cent at 18,847.66 points. Global currencies took a beating on Friday with the South African Rand down 5.25 per cent, Brazilian Real down 5.17 per cent, Mexican Peso 3.54 per cent, Russian Rouble 3.44 per cent and Malaysian Ringgit 2.78 per cent. The Indian Rupee was fairly steady losing 0.82 per cent. The rupee lost 55 paisa to close at Rs 67.25. Considering the losses suffered by others it was actually a gainer in the basket.

Listing look
There were two listings which happened on Monday and Tuesday. While PNB Housing Finance had a great listing, Varun Beverages managed to eke out gains on day one. At the end of the week PNB Housing was up 19.57 per cent at Rs 926.70 against an issue price of Rs 775, while Varun Beverages was down 1.37 per cent at Rs 438.90 against issue price of Rs 445. Things at the Bombay House, the headquarters of Tata Group are turning acrimonious. The feud between ousted chairman Cyrus Mistry and interim chairman Ratan Tata just got worse. Tata sons would be requisitioning an Extraordinary General Meeting (EGM) to oust Cyrus from the chairmanship. The feud is not good for either of them and needs to be resolved at the earliest.

Street mayhem
The performance of PSU banks on the NPA front seems to be getting marginally better. The list of NPAs has not reduced but the addition finally seems to be getting under control. Consequently, we saw the PSU banks being gainers in the week when there was mayhem on the street.

The low levels which the market has reached are levels made on June 24. The low on the SENSEX was 25,902.45 while it was 7,927.05. In short the entire rally from June to September has virtually been retraced and almost 2/3rds happened in just one day. The high made on September 6-7 was 29,077.28 points and 8,968.70 points. Roughly, the gain from the low to the high was 3,100 points on the SENSEX and 1,000 points on the NIFTY. It was a sharp fall and needs time for the markets to regain their composure.

A setback
The currency demonetisation has caused a setback to the economy in the short term and results for the October-December quarter would be partially affected.

This step would certainly ensure that GST is a reality with effect from 1st April 2017. GST would be a dampener in the short term for industry in March 2017. Looking at things practically, the year 2016-17 would therefore not see the turnaround that was being hoped for. One should wait for that in 2017-18 only.

The markets would be under pressure when they reopen for trading on Tuesday. One should be choosy in buying stocks as there would be no dearth of choices in the coming days. Take your pick and enjoy buying at bargain prices.

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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