Rocky roads and a rough ride

Apr 04, 2016, 09:18 IST | Arun Kejriwal

Bulls manage to hold on in turbulent times

The week gone by was choppy and volatile. The bulls managed to hold on to the gains in the March series. Benchmark indices closed marginally in the red, while broader indices registered small gains. The BSE SENSEX lost 68.02 points or 0.27 per cent to close at 25,269.54 points, while NIFTY lost 3.45 points or 0.04 per cent to close at 7,713.05 points. The BSE100, BSE200 and BSE500 gained 0.14 per cent, 0.29 per cent and 0.41 per cent while BSE MIDCAP was up 1.12 per cent and BSE SMALLCAP 1.31 per cent respectively.

Reserve Bank of India will be in focus tomorrow
Reserve Bank of India will be in focus tomorrow

The top sectoral gainer was BSE REALTY up 2.74 per cent followed by BSE POWER up 2.65 per cent, BSE FMCG 2.05 per cent and BSE BANKEX 1.85 per cent. The losers were led by BSE HEALTHCARE down 2.19 per cent, followed by BSE METAL 2.02 per cent and BSE TECH 0.71 per cent.

Raghuram Rajan. Pic/PTI
Raghuram Rajan. Pic/PTI

In individual stocks, IDFC was up 6.02 per cent, closely followed by Bank of Baroda 6.01 per cent and ITC 3.58 per cent. In other stocks, GE Shipping was up 9.5 per cent, followed by Union Bank 8.70 per cent. On the losing side were Vedanta down 6.82 per cent followed by Bharti Airtel 6.50 per cent, Hindalco 5.04 per cent, HDFC 4.39 per cent and Mah & Mah 4.32 per cent.

March Nifty futures expired at 7,738.40 points, a gain of 767.80 points or 11.01 per cent. It is fairly rare that one sees double digit gains during the course of one expiry. The rupee gained 38 paisa or 0.57 per cent to close at R 66.26 to the Dollar. Dow Jones recorded gains of 277.02 points or 1.585 to close at 17,792.75 points. The US Fed chairperson seems to be confused and has said that interest rate hike is unlikely any time soon. While this may have a short term positive impact, the longer term becomes negative, as it is becoming increasingly clear that the US economy is not growing in the manner expected.

Watch this
In India, the RBI meets on Tuesday for its monetary policy review and a minimum of 25 basis cut in interest rates is already discounted by the market. If there is to be a sharper rally in the coming days, then RBI governor Raghuram Rajan may surprise one and all by cutting rates by 50 basis points. I subscribe to conservative thinking, and, would be happy with a 25 basis point cut with more to follow, depending upon the monsoon, which is expected to be decent.

In primary market news, shares of Bharat Wire Ropes listed on Friday and closed a tad higher at R 45.40 on the BSE, against the issue price of R 45. What is surprising is the fact that the sole FII who had subscribed, sold on day one. Further, a very high 40 per cent of the IPO size has been sold on day one. Secondly, a very large quantity of 39.5 lakh shares have been bought by various entities who seem to have lent support to provide stability to the share price.

Shares of Infibeam Incorporation would list today. This company would be India’s first listed e-commerce player. The shares were allotted at the top end of the band of Rs 432. A total of Rs 450 crore, was raised through the issue.

Track them
There is an IPO opening on April 5 and closing on April 7, from Equitas Holdings Limited. The fresh issue is for R 720 crore, while the offer for sale is for Rs 1456 crore, in a price band of Rs 109-110. This would be the second issue in the microfinance space after SKS microfinance, which has had a chequered history. The company Equitas, has also been given a small finance bank licence and the company is in the process of fulfilling the necessary formalities for conversion into a bank. The present assets under management across the three verticals it operates namely micro-finance, vehicles and home loans is about Rs 5,500 crore. FIIs and NRIs are not allowed to apply in the issue, per RBI restrictions, but may buy post listing. There is a cap on foreign holding at 49 per cent. The present FII holding of 93 per cent would be brought down to 35 per cent post issue, which would be by way of secondary offerings and fresh issue. The cap on FII holding gives an opportunity for quick returns in the share.

Brace yourself
Markets will continue to be choppy in the short term. RBI policy on Tuesday and results for the January to March quarter, would be the key drivers in the immediate short term. There is some amount of expectation that things are likely to be better going forward, and, that one would see green shoots in the result season. Some companies are expected to show that the trend is changing, and this would become more widespread when the monsoon effect kicks in the first quarter of the financial year 2016-2017.

For the optimist, this would be a quarter of reckoning. For the trader, this is an ideal opportunity to take a stand as the results start to be declared. Be patient and track any trends as they emerge.

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

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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