It is consolidation time, the mood is circumspect and patience is the need of the hour
Markets were in consolidation mode last week, and, were fairly range bound. The BSE SENSEX gained 71.51 points or 0.79 per cent to close at 24,717.99 points, while, the NIFTY gained 24.85 points or 0.33 per cent to close at 7,510.20 points. The broader markets gained similar with BSE100, BSE200 and BSE500 up 0.30 per cent, 0.24 per cent and 0.25 per cent respectively. BSEMIDCAP gained 0.45 per cent but BSESMALLCAP was a small loser at 0.08 per cent.
Union Finance Minister Arun Jaitley and IMF MD Christine Lagarde pose for group photos with delegates on the concluding day of the MOF-IMF Conference on ‘Advancing Asia: Investing for the Future’ in the Capital yesterday. Pic/PTI
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The top sectoral gainer was BSEAUTO up 1.55 per cent followed by BSEHEATHCARE and BSEREALTY at an identical 1.06 per cent. The losers were led by BSEIT down 1.37 per cent, followed by BSEBANKEX 1.36 per cent and BSETECK 1.03 per cent. In individual stocks, the top gainer was Cairn India up 14.87 per cent followed by Steel Authority 6.49 per cent and Hindalco 5.17 per cent. The top loser was Bank of Baroda down 5.5 per cent, followed by State Bank 4.27 per cent, Idea Cellular 3.45 per cent and BHEL 3.36 per cent.
After the sharp rise post budget, things were more circumspect. The salient feature was that FIIs who have been sellers for a long time, turned buyers post the budget day. They have bought on every single day since then. There have been eight trading sessions and net purchases from them, which clearly means that their view on India has changed. They are positive and have appreciated the efforts of the Finance Minister Arun Jaitley to maintain the deficit on committed number of 3.5 per cent of GDP.
Global markets were also better and Dow Jones gained 206.51 points or 1.21 per cent to end at 17,213.31 points. The Rupee gained 4 paisa or 0.06 per cent to close at R 67.04 to the dollar.
Parliament is actually functioning. It feels good that after such a long time, our politicians are actually functioning. The Aadhar bill has been passed and it would be mandatory to possess an aadhar card to receive direct transfer of any form of subsidy from the Government. The problem of leakages would be completely eliminated through this system.
The IIP or Index of Industrial Production continued to remain negative for the third consecutive month in January 2016. The absolute number is irrelevant, as the trend is disturbing. We need to reverse this as soon as possible and the amount proposed to be spent as part of the budget on infrastructure has the potential to do so. One hopes that looking at the current state of the economy, the spending begins in full earnest from April itself.
The Federal Reserve meets tomorrow, Tuesday and Wednesday for its policy meet. One is not sure what the Fed decides to do, but there are no expectations from this meet.
If the Fed does decide to increase interest rates, there is a distinct possibility that the markets may not like it and react adversely. Considering the fact that the US goes to polls in the latter half of this year, unchanged rates is the most expected outcome.
Now about Mallya
Vijay Mallya, chairman of Kingfisher group, was declared a wilful defaulter some time back. Diageo who purchased Mallya’s stake in United Breweries from Mallya, signed a non-compete clause and paid an upfront amount of about 40 million dollars to get rid of Mallya from the companies which they had acquired. This action has caused a chain reaction of events, so much so that Mallya who has currently left the country is suspected to have run away. While he has tweeted that he is on a business trip and would be back once the same is completed, doubts are being expressed.
While the issue has all the lenders united, it forced SEBI to take action and propose that a wilful defaulter cannot access the capital markets, or be on the board of any company. Things are happening swiftly and the courts need to see that such cases are swiftly heard and settled. Also, all matters referring to any wilful defaulter should be referred to just one court and various courts should not be allowed to pass judgements on appeals, which are meant to just delay things, and delay returning the original money.
Markets will continue to be range bound and consolidate in the current week. It makes sense to take some money off the table and wait for better opportunities.
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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