On a selling spree

The markets as expected, rallied in the initial part of last week, but the selling pressure was simply too much to keep the momentum going. The two-day rally then turned into a selling spree and the markets closed negative for the week. The rally saw the BSE SENSEX gain 407 points and rise from 16,141 to an intra-week high of 16,549 on last Wednesday. There onwards, the markets slipped and lost 783 points to touch an intra-week low 15,765 points. The intra-week swing was of 1,191 points. The BSE SENSEX settled at 15,848.43 points losing 293.24 points or 1.82 per cent, making it the fifth consecutive weekly loss. The NSE NIFTY lost 97.85 points or 2.02 per cent to close at 4,747.80 points. The broader indices like the BSE100, BSE200 and BSE500 lost similar ground with weekly losses of 2.05 per cent, 1.99 per cent and 1.89 per cent. The BSE MIDCAP and BSE SMALLCAP lost substantially less with losses of 1.51 per cent and 1.33 per cent respectively.



Resilience
In sectorial indices, the BSE METAL lost 5.29 per cent while the BSE BANKEX lost 4.81 per cent. BSE IT showed resilience and lost a mere 0.38 per cent while the BSE FMCG lost even less at 0.15 per cent. The markets are likely to bounce this week and it would be these sectors, which would move up if the rally does happen. In stocks, SBI lost 7.40 per cent, PFC or Power Finance lost 8.88 per cent. Steel giant Tata Steel lost 8.05 per cent, while mining giant, Sesa Goa lost 8.43 per cent.

Eventful
The week was very eventful with the August series expiring and the markets seemed to just give way during the week. The agitation on corruption in New Delhi finally ended, with an amicable settlement between the face of the agitation Anna Hazare and the government and Parliament on the other side. The good thing of this agitation has been the spontaneous response that this movement received all over the country. I believe the key takeaway from this agitation is that the people have learnt that they have the right to demand answers from their elected representatives.

Issues
Two issues opened for subscription and closed garnering response. TD Power Systems was subscribed overall 2.92 times only because QIB's subscribed the issue 6.52 times. HNI and retail was under subscribed at just 38 per cent each. The market sentiment and the higher valuations kept out these categories, but the institutional investors liked the business model and the growth prospects of the sector. The other issue was from SRS Limited, which was subscribed 1.25 times, largely on the strength of the HNI portion, which was subscribed 5.11 times. The issue was expensive and therefore retail investors chose to ignore the issue.

Listing
Tree House listed on Friday and the issue, which had a price band of Rs 135-153 saw the issue priced at the lower end of the price band. Shares opened firm and traded higher than the issue price in the first half of the day and then just crashed. The share closed at Rs 116.55 after touching a high of Rs 161.50 and a low of Rs 104.15. The close was a loss of Rs 18.45 or 13.67 per cent. It is time merchant bankers and promoters in particular, realised that it is imperative that they allow investors in the primary market to make some money, otherwise this avenue of raising capital will dry up. The bond issue from India Infoline listed during last week and the bonds were trading at a discount of 5 per cent. Retail investors need to understand the nuances of the debt market, as they are not the same as equity markets. Two other bond issues are also currently on from Mannapauram and Muthoot. The bond issue from Shriram City Union is likely to list.

Short
The week gone by saw selling from Foreign Institutional investors to the extent of Rs 4,300 crore while the local or domestic institutions bought stock worth Rs 600 crore. The week starting today, is a very short week because of two consecutive holidays on Wednesday and Thursday. Market players would like to keep their positions light at the end of Tuesday with two holidays ahead of them and irrespective of the performance of the market in the first two days, one would see profit taking in the second half of Tuesday's trading. Friday, after the break would be more of a catching up of the global markets in two days when Indian markets are closed.

Caution
The markets are likely to consolidate but any recovery will lead to profit taking. The BSE SENSEX has support at 15,765, then at 15,657, then at 15,559 and finally at 15,166 points. It has resistance at 16,148, then at 16,343, then at 16,639 and finally at 17,056 points. The NSE NIFTY has support at 4,720, then at 4,687, then at 4,655, then at 4,535 and finally at 4,425 points. It has resistance at 4,839, then at 4,902, then at 4,965, then at 5,032 and finally at 5.089. The week is likely to be extremely volatile on two counts. The first is the two consecutive holidays and the present oversold and weak sentiment, where every rally will be accompanied by selling from people who doubt the rally and those who would like to use the rally as an exit point. Trade cautiously but refrain from fresh shorts at these levels.

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
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