Sudden slump

Aug 04, 2014, 09:01 IST | Arun Kejriwal

All is not well at Dalal Street as weakness and losses were seen. But correction offers hope of a rise in this week

The markets were weak on expected lines and fell sharply last Thursday and Friday to close the week with substantial losses. The BESENSEX lost 645.91 points or 2.47 per cent to close at 25,480.84 points while the Nifty lost 187.85 points or 2.41 per cent to close at 7,602.60 points. 

Ups and downs
The broader indices saw the BSE100, BSE200 and BSE500 losing 1.99 per cent, 1.83 per cent and 1.80 per cent respectively. The BSEMIDCAP lost 0.70 per cent while the BSESMALLCAP lost 1.46 per cent. In sectors so widespread was the loss that there was just one gainer and that too marginal in BSEHEALTCARE which gained a mere 0.08 per cent. The losers were led by BSECAPGOODS which lost a staggering 7.81 per cent followed by BSEOIL&GAS down 3.01 per cent and BSEMETAL down 2.91 per cent.

In individual stocks Bharti Airtel gained 7.02 per cent followed by Hindustan Unilever at 4.83 per cent and Hindustan Petroleum up 4.67 per cent. On the losing side were Larsen and Toubro down 11.11 per cent, Axis Bank 7.08 per cent and NTPC 5.51 per cent. Other losers included momentum stocks Wockhardt down 11.07 per cent and Financial Technologies 13.91 per cent.

The market fell on expiry day on account of selling pressure, yet closed the July futures with gains of 228 points or 3.04 per cent at 7,704. Friday saw across-the-board selling on account of global cues which included the Russian sanctions, Gaza conflict, Argentina default and Portugal bank collapse. The markets were looking tired and needed to correct, which they have done.

Rupee weakens
FIIs turned sellers last week and sold shares worth R 2,750 crore. They were net buyers in July of R 9,350 crore and in the first seven months of the calendar year have bought shares worth R 71,960 crore. Domestic institutions, which were sellers, turned buyers of equity in the week, of R 3,700 crore while in the month of July they were buyers of R 5,050 crore. In the first seven months they were net sellers of R 1,800 crore. The Indian rupee turned weak and closed at R 61.18, a loss of R 1.08 or 1.80 per cent.

The insurance bill, proposing to increase FDI to 49 per cent from the present 26 per cent, has been taken up for debate in the Rajya Sabha. Readers would remember that it was proposed in the Budget, cleared by the cabinet and is now being debated in Parliament, all in the space of 20 days.

Coming up next
RBI meets on Tuesday for the policy review and, in a week bereft of news triggers, will be in focus. The consensus is that policy rates will remain unchanged but with a softer bias, signalling that there may be softening of rates going forward, seeing the government’s intention to rein in inflation. Also, what will help will be the fact that the monsoon has certainly picked up and the El Nino effect has largely been contained, or the risk mitigated.

The silver lining to the week could be if the governor decides to give a boost to the economy and makes a token cut signalling his willingness to accept the efforts from the government. One must remember that core sector grew at 7.3 per cent in June, its best ever in 9 months and this would augur well when IIP numbers are declared later in the month.

The correction, which was more than welcome, looks like continuing with the markets consolidating in the earlier part of the week before they resume their upward climb and target 27,000 on the Sensex and 8,000 on the Nifty. The move could get a pleasant surprise and fillip if Raghuram Rajan, the RBI governor decides to take the lead, otherwise bide your time till the end of the week. Use weakness to buy shares.

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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