Robust Thursday rally changes sentiment for the better, after seven straight days of losses
In the previous week, the markets behaved exactly as expected. They lost for the first three days and then rallied on the last day as written. The planned holiday on Thursday was changed to Friday and hence the rally happened on Thursday.
The rally was strong and coming as it did after seven consecutive days of losses, changed the mood and sentiment at the weekend. The BSESENSEX lost 266.73 points or 1.29 per cent at 20,399.42 points. The Nifty lost 84.60 points or 1.38 per cent to close at 6,056.15 points.
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Calm is the balm: Raghuram Rajan gestures during a press conference in Mumbai seeking to calm currency markets and said the current account deficit in 2013-14 will be USD 56 billion and there is no fundamental reason for Rupee depreciation. Pic/AFP
The broader indices like the BSE100, BSE200 and BSE500 lost 1.27 per cent, 1.22 per cent and 1.22 per cent respectively. The BSE MIDCAP lost 1.13 per cent while BSE SMALLCAP lost less at 0.95 per cent. There was just one sectoral gainer in BSE AUTO which was up 0.41 per cent. The losers were led by BSE REALTY down 2.91 per cent. Other losers included BSE CAPGOODS down 2.69 per cent and BSE OIL&GAS down 2.48 per cent and BSE PSU down 2.43 per cent.
Stocks
In individual stocks, the biggest gainer was Tata Steel up 5.54 per cent. Other gainers included M&M up 5.52 per cent and LIC Housing up 3.75 per cent. The losers were led by IOC down 7.06 per cent. The other losers included Coal India down 5.89 per cent and GAIL down 5.82 per cent. NSEL promoter companies MCX lost 9.21 per cent and Financial Technologies 8.23 per cent. Quite a few borrowers of NSEL and some of its officials have been arrested, while promoter directors have resigned from the board of MCX.
Purchases
Foreign Institutional Investors (FIIs) continued their purchases and bought shares worth Rs 1,957 crore while domestic institutions sold shares worth Rs 819 crore. The Rupee was under severe pressure, and the rally which developed on Thursday, could be attributed to the Reserve Bank of India (RBI) Governor, R Rajan talking up the Rupee and hence the markets. He has assured people that the current account deficit would be lower than the earlier figure, and, also assured that all steps would be taken to keep the Rupee at a reasonable level. The Indian Rupee that had fallen to 63.90 during the week, recovered to close at Rs 63.11, a weekly loss of 64 paisa or 1.02 per cent.
Rise
The Dow Jones is at a multi-year high and gained 200 points or 1.26 per cent to close at 15,961.70 points. Comments from the Federal Reserve (FED), on possible timing of tapering not being as early as December 13, helped the markets gain globally. Other data during last week was a mixed bag, with inflation both at the consumer and wholesale levels rising. While wholesale inflation rose to 7 per cent against 6.46 per cent in September, consumer inflation rose to 10.09 per cent against 9.84 per cent in the previous month. This puts paid to any sort of relief that could have been expected in interest rates being reduced in the December review meet. On the positive front, factory output rose 2 per cent against 0.4 per cent led by a sharp jump in electricity generation.
Comments
A row kicked off after Union Minister, Anand Sharma was unhappy at comments made by Investment banker Goldman Sachs, on the BJP and the investment climate is set to intensify further. International Hedge Fund manager, Jim Rogers has commented about Indian politicians and blamed them for the sorry state of affairs. He says that India has been badly managed for the last 60 years and one knows which party has been running the country. Freedom of speech whether it is of the media, internet or people, commenting on India, is certainly under the scanner and the last word on this has not yet been written.
Outcome
Results during last week were a mixed bag. Companies like Tata Steel and Sun Pharma produced excellent results and the same was reflected in their price movements. Companies like Coal India had a flat quarter and saw the share price fall. SBI produced poor results on the back of higher provisions. The NPA’s of 40 listed banks has cumulatively increased by 38 per cent from 93,000 crore to 1, 28,000 crore at the end of September 2013. This does not augur well for the banking system and a case in point is Central Bank of India which saw losses of Rs 1,500 crore for the quarter, the government would infuse Rs 1,800 crore by way of additional capital. This means the effective infusion is reduced to Rs 300 crore and the bank would have to receive further capital in case it wants to grow, as thecapital adequacy would be under threat.
Ahead
This week is likely to see some further up move on the back of the rally which began on Thursday. This is a correction to the over 1160 point fall in the Sensex and nothing more than that.
Key levels for the Sensex are 20,080 and 20,810 while they are 5,950 and 6,255 for the Nifty. The support for the Sensex is at 20,308 points, then at 20,151 points, then at 20,034 points, then at 19,935 points and finally at 19,802 points. It has resistance at 20,529 points, then at 20,665 points, then at 20,775 points, then at 20,996 points and finally at 21,171 points.
The Nifty has support at 6,027 points, then at 5,966 points, then at 5,910 points, then at 5,825 points and finally at 5,735 points. It has resistance at 6,092 points, then at 6,157 points, then at 6,223 points, then at 6,2969 points and finally at 6,310 points. Play the rally and the subsequent fall which would also be swift.
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 https://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.
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