The seesaw effect

Jul 15, 2013, 01:13 IST | Arun Kejriwal

Focus on volatility with the week seeing contrasting movements

The previous week was volatile and once again it saw completely different movements in the first half and second half of the week. The fall on Monday and Wednesday and the huge gains on Thursday and Friday did make one wonder about the state of the economy. The BSESENSEX gained 462.65 points or 2.37 per cent to close at 19,958.47 points.

Bangalore, INDIA: Founding member of Infosys N R Narayana Murthy speaks at a press conference following his reappointment as executive chairman at the company’s headquarters in Bangalore. In individual stocks, the biggest gainer was Infosys

The NIFTY gained 141.10 points or 2.40 per cent to close at 6,009 points. The broader indices fared similar with the BSE100, BSE200 and BSE500 gaining 2.46 per cent, 2.20 per cent and 2.12 per cent respectively. The BSEMIDCAP gained 0.94 per cent while the BSESMALLCAP gained 0.7 per cent. The top gainer in sectoral indices was BSEIT, which gained 9.63 per cent. Other gainers included BSETECK at 7.89 per cent and BSECAP 4.45 per cent. The losers included BSEAUTO down 2.28 per cent, BSEOIL down 1.30 per cent and BSEPSU down 1.02 per cent.

Washington, District of Columbia, UNITED STATES: Federal Reserve Chairman Ben Bernanke speaks during a press conference. Bernanke said that the Fed’s easy-money policy is still necessary, throwing cold water on fresh market expectations, that the Fed’s stimulus would soon be ended. Bernanke told an audience of economists in Cambridge, Massachusetts, that the jobs market remains too weak and inflation remains too low for comfort

In individual stocks, the biggest gainer was Infosys, after it posted better than expected results and maintained guidance for the current year 2013-14 at 6-20 per cent. The share gained Rs 349 or 14.22 per cent to close at Rs 2,803. Others included Sun Pharma up 7.05 per cent, Bhel up 5.24 per cent and Dr Reddy up 5.10 per cent. The losers included last week’s stocks, Gitanjali Gems down 22.58 per cent, MMTC down 22.51 per cent and BPCL down 6.29 per cent.

Last week, saw a huge sell off on the FED news of tapering of the quantitative easing. The same resulted in a huge upsurge when people began assuming that the time of the easing maybe later than originally expected. It may be noted that there is however no time frame officially announced, and all that the markets have done, is speculated on the same. There is a possibility that in the coming few weeks, the markets again take a different view on the timing and manner of the withdrawal of bond buying, by the US government and react accordingly.

FIIs have slowed down their sales momentum and were net sellers of Rs 670 crore in equities and just under Rs 4,000 crore in the debt market. Domestic institutions were net sellers of Rs 640 crore in the equities market. The trade data for June saw the deficit falling because we imported less gold. The cause for concern is the fact that exports continued to slow down and this, is even though our exports have become competitive since the rupee depreciation. IIP or industrial production for May 2013 was negative at 1.6 per cent. To add to the woes, was the fact that the April numbers were revised downwards from 2.33 per cent to 1.88 per cent. CPI or consumer inflation for June rose to 9.87 per cent and food inflation rose to 11.84 per cent against 10.65 per cent in May 2013. What is now worrisome is that RBI governor may not think of cutting interest rates at all in the July 30 meeting.

The markets are moving like a seesaw and the net result seems to be virtually flat. Since the beginning of the calendar year, the markets seem to have gone all over the place but are virtually still just there. The net gains for the week are virtually the net gains for the year. With such sharp moves, the only thing being achieved is the fact that investors are running away from the markets.

Mangalore Chemicals continued to be in the news with Zuari Agro picking up close to an additional 6 per cent stake in the Vijay Mallya company. There are two potential suitors with Deepak Fertilisers having bought a 24.5 per cent stake and Zuari Agro having a roughly 16 per cent stake. The promoter’s stake of just fewer than 21 per cent is pledged with lenders and is slowly finding its way to the markets. The share gained 29.48 per cent to close at R 70.05. It appears that the market price has reached levels where the same may now not offer any further gains to investors. Hence, it may make better sense to invest in the companies that have bought this stake instead.

The SENSEX last Friday opened with an upside gap between 19,725 and 19,785 points with NIFTY having a similar gap between 5,948 and 5,951 points. This would act as a support and once broken downwards would act as a resistance. The IIP and inflation numbers which came after the close of markets on Friday is likely to ensure the latter happening. Key levels for the SENSEX are 19,625 and 20,250 while they are 5,900 and 6,110 for the NIFTY. The support for the SENSEX is at 19,832, then at 19,625 points, then at 19,432 points, and finally at 19,237 points. It has resistance at 20,038 points, then at 20,239 points, then at 20,328 points and finally at 20,443 points. The NIFTY has support at 5,967 points, then at 5,899 points, then at 5,850 points and finally at 5,775 points. It has resistance at 6,034 points, then at 6,093 points, then at 6,140 points and finally at 6,211 points.

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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