The Bihar effect
Markets may react adversely, then try to move up
The Bihar elections have been won by the JDU-RJD-Congress combine, soundly defeating the NDA. There was a lurking suspicion and doubt and the market was expecting this outcome, but the final tally for the NDA is disappointing.
Coming to the markets, in case there is a sharp dip today, it should be used as a buying opportunity. In case markets recover without a sharp fall, all is well. Wishing readers a Happy Diwali and Prosperous New Year
The markets have been weak and falling almost continuously since they peaked on October 26, at 27,618 points on the Sensex. The close on Friday was at 26,265 points, a loss of 1,353 points or almost 5 per cent.
The markets, in all likelihood, will react adversely to the Bihar results and then try to move up, as there was hardly any positive build-up of positions. The negative effect may last intraday or at the maximum for a day.
The Sensex was under pressure through the week with one flat day and one minor positive day. The net loss on the Sensex was 391.59 points or 1.47 per cent for a close of 26,265.24 points. The Nifty lost 111.50 points or 1.38 per cent to close at 7,954.30 points.
The broader market saw the BSE100, BSE200 and BSE500 lose 1.39 per cent, 1.43 per cent and 1.51 per cent respectively. BSE MIDCAP lost 1.35 per cent whilst BSE SMALLCAP lost 2.32 per cent. In sectoral gainers, the top performer was BSE PSU up 0.99 per cent followed by BSE AUTO 0.54 per cent and BSE OIL&GAS 0.47 per cent.
The losers were led by BSE HEALTHCARE down 6.07 per cent followed by BSE CAPGOODS 2.74 per cent and BSE METAL 5.49 per cent. In individual stocks, the top gainer was Coal India up 6.80 per cent followed by Mahindra and Mahindra 5.49 per cent and Bank of Baroda, 4.43 per cent.
The losers were led by Dr Reddy, down a massive 14.99 per cent, after a US FDA warning, followed by metal stocks SAIL Tata Steel and Vedanta which lost 11.72 per cent, 10.80 per cent and 7.75 per cent, respectively.
In international markets, Dow Jones inched up gaining 46.90 points or 0.26 per cent to close at 17,910.33 points. The Indian rupee lost 49 paisa or 0.75 per cent to close at R65.75.
Results from the larger companies continue to be a mixed bag. Tata Motors reported a loss after over five years of profits, on account of the loss suffered in the China port fire. Britannia reported a disappointing set of numbers.
Less said for the capital goods companies like BHEL, the better. Overall, the expected turnaround is still some time away. India has launched its gold coin and also announced details of gold bonds. Coins would be available in 5 gms, 10 gms, and bullion of 20 gms and have the Ashoka Chakra on one side.
The interest on the gold bonds would be 2.75 per cent and one can invest for a sum equivalent of 2 grams to 500 grams. The government hopes that with this gold bond, they would be able to reduce the demand for gold and also use the investment productively.
Shares of Coffee Day Enterprises, the company which owns the Cafe Day chain listed on Monday, October 26. Shares which were issued at a price of Rs 328 were on the receiving end and lost substantial ground closing around Rs 270.
They closed for the week at Rs 270.80, a weekly loss of Rs 57.20 or 17.43 per cent. The market had always felt that the shares were expensive. Shares of Interglobe Aviation Limited the owners of the popular low cost airline Indigo would list on Tuesday, November 10.
Shares were lapped up by QIBs and the issue price is Rs 765. One is reminded of the listing of Coal India five years ago on the similar date, one day before Muhurat trading and the fact that markets had a nasty fall thereafter. While conditions are completely different, one only hopes that history does not repeat itself.
Markets are at a very important level and need to take definite direction from here onwards. Currently, if one looks at last Diwali to now or year to date in the current calendar year, markets are negative, and have not delivered any returns to investors.
There has to be some positive news for fresh inflows to happen. While the government is doing its best to ensure clarity on its policies and has resolved many of the ticklish issue concerning MAT and others, doubts continue to linger. The way GST is now tackled would be keenly watched.
The role of the advisor is critical if funds from retail investors are to come to mutual funds. This was highlighted at the CII summit on channels of distribution. Pension and retirement products introduced by the government, have to be added to the bouquet of products available to investors.
The fact that retail investors and domestic institutions have been buyers, while FIIs were sellers, is testament to the fact that the investor is becoming aware of the benefits of capital market investment and growth opportunities.