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As Reserve Bank of India governor Raghuram Rajan reviews the monetary policy on December 18, Fed chief Ben Bernanke will take a call on tapering being done or not, on the same day
Markets last Monday opened a gap up as expected, and hit new lifetime highs. The BJP win was followed by euphoria, but this seldom lasts. Reality had to take over and it did. The markets fell for the next four days consecutively. BSESENSEX lost 280.95 points or 1.34 per cent at 20,715.58 points. The Nifty lost 91.50 points or 1.46 per cent to close at 6,168.40 points.
The broader indices like the BSE100, BSE200 and BSE500 lost a little more at 1.60 per cent, 1.59 per cent and 1.58 per cent respectively. BSEMIDCAP lost 1.35 per cent while BSESMALLCAP lost 1.52 per cent. The top sectoral gainer was BSEIT up 1.61 per cent. Other gainers included BSETECK up 0.81 per cent and BSEFMCG up 0.29 per cent. The losers were led by BSEPOWER down 4.60 per cent, BSEPSU down 4.34 per cent and BSECAPITAL GOODS down 4.15 per cent.
In individual stocks the biggest gainer was Sesa Sterlite up 5.15 per cent, followed by Wipro up 5.19 per cent. Other gainers included Infosys up 1.41 per cent and ITC up 1.09 per cent. The losers were led by BHEL down 9.63 per cent. Other losers included Jet Airways down 9.72 per cent, Power Finance down 9.56 per cent and Jindal Steel down 8.39 per cent. Clearly losers were far too many and gainers were merely a handful.
The Sensex hit a lifetime high of 21,483 while the Nifty hit 6,415. In the process of doing so, the two indices opened with huge gaps. The gap in the Sensex was between 21,049 and 21,416 while in the Nifty it was between 6,275 and 6,415 points. This gap acts as an area of resistance, and once the same is crossed, it should act as an area of support.
FIIs were big buyers on the day when election results were announced. Thereafter, they returned to their normal level of activity. They were buyers of Rs 4,595 crore in the week. Domestic institutions were net sellers of Rs 3,075 crore in the week. The Indian rupee depreciated by Rs 0.72 or 1.17 per cent to close at Rs 62.13.
Data from the economic front was a mixed bag with consumer inflation being at 11.24 per cent against 10.9 per cent in the previous month. Trade deficit fell in November, to $ 9.23 billion against $ 10.56 billion in the previous month. The worrisome fact besides inflation was, the Index of Industrial Production (IIP), which was negative at 1.8 per cent for October. Ten of the 18 sectors reported negative growth, and this negates whatever green shoots people were talking about last month.
The coming week will be driven by two central bankers and what they do on the same day. Reserve Bank of India (RBI) governor Raghuram Rajan, reviews the monetary policy on December 18, where looking at the increase in consumer inflation, he is expected to raise repo rates by 25 basis points. In US, the Federal Reserve System (Fed) Chief Ben Bernanke during his review meet on December 17 and 18, will take a call on tapering being done or not done.
Job data which was released on December 6, points the fact that, tapering is imminent. My view is that it could happen as early as January and in a very gradual manner. Any tapering could see a knee-jerk reaction, while remaining unchanged could be a cause for a fresh rally. The Dow Jones index fell 265 points or 1.65 per cent to close at 15,755 points. The concern there is about the economy doing well and the fall in jobless claims was a pointer in this direction.
The week ahead besides the central bank meetings, will also see wholesale inflation data being released. In other news the electricity regulator Central Electricity Regulatory Commission (CERC), announced draft guidelines for power generators and transmission companies.
The changes proposed would hurt the National Thermal Power Corporation (NTPC), and the stock would fall by over 7.5 per cent. The company management did clarify and assure investors through a conference call that this is only a draft guideline, and they would be heard during mid-January 2014. Post the call, the share price of NTPC was steady.
This week is likely to see markets improving, initially on the back of four days of losses. Wednesday and Thursday will be driven by the RBI and the Fed. Key levels for the Sensex are 20,510 and 21,205 while they are 5,985 and 6,310 for the Nifty. The support for the Sensex is at 20,649 points, then at 20,455 points, then at 20,270 points and finally at 20,085 points.
It has a resistance at 20,824 points, then at 20,998 points, then at 21,235 points and finally at 21,485 points. The Nifty has support at 6,150 points, then at 6,103 points, then at 6,025 points and finally at 5,974 points. It has a resistance at 6,197 points, then at 6,244 points, then at 6,335 points, and finally at 6,415 points. Central bank governors will drive markets this week.
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 http://ak57.in
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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