Short, not sweet

Finance Minister Arun Jaitley at BRICS Economic Forum in Panaji Goa PicPTITrading in a truncated week is always difficult as the momentum is broken Last week was no exception With trading holidays on Tuesday and Wednesday markets were flattish on Monday Then all hell broke loose on Thursday when markets resumed after a two day break and the BSESENSEX lost 440 points The reason attributed to the fall was that the US Fed would in all probability raise interest rates in their next meeting Irrespective of that the extent of the fall was unwarranted on this account The real reason for the fall was that markets had become tired and were searching for that reason to fall Any reason was good enough and therefore they fellMaking a pointThe BSESENSEX lost 38754 points or 138 per cent to close at 2767360 points NIFTY lost 11420 points or 131 per cent to close at 858340 points The broader indices saw the BSE100 BSE200 and BSE500 lose 135 per cent 119 per cent and 112 per cent respectively BSEMIDCAP lost 091 per cent and BSESMALLCAP lost 035 per cent The action in midcap and smallcap continues to defy logic and valuations at best could be said to be crazyThe top gainer in indices was BSEOILampGAS up 080 per cent followed by BSEIT 072 per cent and BSECAPGOOD036 per cent The top loser was BSEREALTY down 259 per cent followed by BSEBANKEX 197 per cent and BSEPOWER 133 per cent In individual stocks the top gainer was GAIL up 390 per cent followed by Cipla 296 per cent and Infosys 138 per cent The losers were led by HDFC down 619 per cent followed by Bank of Baroda 595 per cent and Bharti Tele 447 per centAt a glanceResults from the ITC majors TCS and Infosys were declared during the week gone by TCS had improved margins but revenues fell short of expectation In the case of Infosys they met the estimates but the management has guided lower for the remaining part of the yearConsumer Price Index CPI fell for September to 431 per cent against 505 per cent in August Similarly WPI or wholesale price index too fell to 357 per cent CPI is at its lowest level in the last 13 months and markets would want a rate cut CRR the next time RBI meets for its policy review in December This could be a rallying point in the beginning of December or maybe last week of NovemberThatrsquos good newsIn the largest ever FDI deal the Essar group has finally sold almost in totality its stake in Essar Oil and Port for Rs 86100 crore which includes debt The total debt of the group would reduce by half post the deal and this would involve the Ruia group having sold its crown jewel An indirect benefit of the deal would be the availability of Russian crude to be processed at the refinery and release of about Rs 50000 crore of the banking industry blocked funds lent to Ruias A winwin situation for all For shareholders of Essar Oil who had tendered shares or not tendered shares at Rs 262 each there is good news as the deal values the same at substantially higher prices The difference would be paid by the group to minority shareholdersTrading in negativesMarkets would be focused on results as they are declared and there would stock specific movement in the week An overall picture says the momentum of markets has been broken and they would trade with a negative bias While we would always have those up days they should be used to sell and reduce the exposure in the marketThe big worry is in the midcap and smallcap space where one finds that shares are rising 40 per cent to 60 per cent in a week on unprecedented volumesWhile the fall is steeper and more painful itrsquos only the gullible investor who gets trapped not the price and stock manipulator One should be wary of such movements and be very cautious of looking at such stocks Use rallies to exit markets and sit on cashArun Kejriwal is founder of the Mumbaibased advisory firm Kejriwal Research amp Investment Services Pvt LtdDisclaimer 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