Tiring times at Dalal Street

Jun 13, 2016, 08:56 IST | Arun Kejriwal

With all major news having come and gone — elections over, the monsoon on the anvil and policy review ended — the Sensex and Nifty need to rejuvenate and bounce back

It was a choppy week for the markets where they gained initially but profit saw markets end on the losing side. Sensex lost 207.28 points or 0.77 per cent to close at 26,635.75 points while Nifty lost 50.75 points or 0.62 per cent to close at 8,220.80 points. The broader markets fared better with the BSE100, BSE200 and BSE500 losing 0.45 per cent, 0.35 per cent and 0.15 per cent respectively.

The arrival of the monsoon is always keenly watched in India, but even more so this year as much of the country reels from the drought. Pic/AFP
The arrival of the monsoon is always keenly watched in India, but even more so this year as much of the country reels from the drought. Pic/AFP

BSEMIDCAP lost 0.16 per cent but BSESMALLCAP gained 1.92 per cent. The top sectoral gainer was BSEPOWER up 3.32 per cent followed by BSEMETAL 2.73 per cent and BSECAPGOODS 2.40 per cent. The losers were led by BSEIT down 3.48 per cent followed by BSETECH 3.21 per cent and BSEHEACARE 0.97 per cent.

In individual stocks, the top gainer was Vedanta up 11.57 per cent followed by Punjab National Bank 10.24 per cent and Hindalco 9.25 per cent. Steel Authority too gained sharply and was up 8.16 per cent. The losers were led by IT major Infosys down 6.71 per cent followed by Dr Reddy 2.98 per cent and TCS 2.66 per cent.

Policy review
The Indian rupee gained 49 paisa or 0.73 per cent to close at R 66.76. RBI in its monetary policy review kept rates unchanged on expected lines and mentioned that it is willing to consider fresh cuts provided the monsoon is good and therefore inflation which has crept up falls below the 5 per cent level. US Fed meets on Tuesday and Wednesday and is expected to take a neutral stand keeping rates unchanged. The Dow Jones gained marginally up 58.28 points or 0.33 per cent to close at 17,865.34 points.

In what could be seen as a victory for the ruling NDA, election results to Rajya Sabha have strengthened the BJP and NDA. The BJP now has 55 seats and is higher by six seats from the previous session. The Congress now has 61 seats and is down by three seats effectively leaving the gap now as six seats against the earlier 15 seats.

Incidentally, the NDA has the largest number of seats at 74 against the UPA with 71 seats. Others have a large 89 seats in all but many of these regional parties are likely to support the government when it comes to voting on bills if so required. TMC and AIADMK besides the SP are likely to come in handy for the NDA for the GST to be passed. The domination of the Congress in the last two years would certainly reduce after this round of voting.

Monsoon movement
The monsoon has broken over the coast of Kerala and moved up to Goa. While Mumbai has had a few pre-monsoon showers, the actual monsoon is yet to hit. Probably by the time you read this article, it would have hit Mumbai and helped in reducing the heat and humidity.

The markets have run their course and all expected news flow for the time being are currently over. Probably it is because of this that the markets have started looking tired and need some time and value consolidation in the short term. While volatility would continue it seems that any runaway moves in either direction looks unlikely currently and we would trend more sideways with a marginal downward bias.

Primary markets currently seem quiet. However, it is expected that there would be some activity next week onwards. The most likely issue is our Mumbai city CNG gas provider Mahanagar Gas. This company is equally owned by GAIL and British Gas. The issue would dilute 25 per cent on a post issue basis and is expected to be about Rs 1200 crores in size. The best comparison for this would be the Delhi counterpart Indraprastha Gas.

As advised last week, it makes sense to take some money off the table and wait for substantial dips before re-entering the markets. The markets are over heated and need to cool like the weather which needs lots of rainfall to bring the temperature down. Enjoy the rainfall as it happens.

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