Storm after the lull

Published: 31 October, 2011 09:56 IST | Arun Kejriwal |

Fiery days followed the subdued Diwali Muhurat for Samvat 2068

Fiery days followed the subdued Diwali Muhurat for Samvat 2068

Diwali Muhurat for Samvat 2068 was a very quiet day but the two days before and after was really fiery with the SENSEX gaining 315 points on Muhurat eve and a staggering 516 points post Muhurat trading. The sharp Diwali week rallies saw the BSE SENSEX gain its first four digit weekly rally in the year gaining 1019.16 points or 6.07 per cent to close at 17,804.80 points. The NSE NIFTY gained 310.75 points or 6.15 per cent to close at 5,360.70 points. The broader indices like the BSE100, BSE200 and BSE500 gained 5.62 per cent, 5.32 per cent and 4.97 per cent respectively. The BSEMIDCAP and BSESMALLCAP were laggards gaining 2.67 per cent and 1.97 per cent for the week, indicating that the rally was fairly narrow and only the benchmark indices rose. No wonder retail investors who own the midcap and smallcap stocks and did not see the rise in their stocks, feel that the Diwali mood was missing for them.

Illustration/Jishu Dev Malakar

The BSEMETAL was a big gainer clocking gains of 9.39 per cent led by Hindalco, which rose 16.89 per cent, Sterlite Industries rose 15.46 per cent while Tata Steel rose 11.21 per cent. Tata Motors was another big gainer with gains of 15.88 per cent. SBI was a weekly loser with losses of Rs 42 or 2.15 per cent at Rs 1,907. Infosys and TCS chipped in with gains of 5.03 per cent and 6.81 per cent and in the process helped the BSEIT gain 5.51 per cent.

Foreign Institutional Investors were big buyers during the short week with net investments of Rs 2,643 crore, while domestic institutions sold stock worth Rs 2,078 crore.

The domestic sales figure is quite big and in recent months one has not seen a four-digit sale figure on a single day in a long time. The foreign buying was on account of the so-called settlement in Greece, where the lenders (banks) have been forced to take a 50 per cent haircut on their loans to Greece. 
This write off would affect the financial condition of the banks and there would be detailed discussion when the European Union meets again in the course of the coming week. The fine print of the settlement is yet to be available, and there are many unanswered questions about the same. For now, though, the world is celebrating and so is India.

Coming to India, RBI raised repo rates and reverse repo rates by 25 basis points and gave an indication that they will not do so in the future provided inflation remains no more than 7 per cent. Looking at the current inflation this looks a tall order but the Diwali mood was infectious. RBI has also deregulated savings bank interest rates and they are likely to move up between 50 and 150 basis points in the near future. The Indian Rupee also gained during the week and closed at Rs 48.76 gaining Rs 1.27 against the previous week's close of Rs 50.03. Expiration for October series saw markets rallying in the last hour and we had a big gain that day of 315 points on the BSE SENSEX and 93 points on the NSE NIFTY.

Over the last 10 weeks we have been talking of the downside gap made on the indices on August 5, 2011. The gaps were between 17,664 and 17,358 on the BSE SENSEX and 5,323 and 5,229 on the NSE NIFTY. Strange as it may seem or sound, similar gaps on the upside have been made on the BSE SENSEX between 17,350 and 17,671 and on the NSE NIFTY between 5,219 and 5,322 points. Very rarely has one seen the complete gap being filled in totality on an index in this manner and I am not quite sure what one should read into the same. For the moment, one can say that the Diwali week has changed the sentiment and one should look and hope for things to improve going forward.

Results are showing signs of profit growth slow down on account of input and interest costs. Sales are growing but cost pressures have seen margins being eroded and this could be a cause for worry when results from the bulk of companies come in the first fortnight of November with November 15 being the deadline for declaring results. The week ahead would be volatile and be guided by global movements tracking Europe and in company specific results for the quarter ended September 2011.

The BSESENSEX has support at 17,681 points, then at 17,445 points, then at 17,166 points, then at 16,898 points and finally at 16,670 points. It has resistance at 17,918 points, then at 18,175 points, then at 18,268 points and finally at 18,440 points. The NSENIFTY has support at 5,322 points, then at 5,245 points, then at 5,163 points, and finally at 5,178 points. It has resistance at 5,399 points, then at 5,477 points, then at 5,521 points, and finally at 5,591 points. The bottom of the August 5 gap would act as a strong support and as long as it does not break one may trade on the long side. Volatile markets at crucial levels, and plenty of action globally on account of Europe and locally on account of results would be the order of the week. Trade cautiously. 
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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