The fall call

The New Year has just begun but the markets are falling continuously The BSESENSEX lost 47929 points or 192 per cent to close at 2445504 points while NIFTY lost 16355 points or 215 per cent to close at 743780 points The broader markets lost much more with the BSE100 BSE200 and BSE500 down 279 per cent 318 per cent and 359 per cent The readers of this column would recall having been forewarned that valuations in these sectors or stocks have over extended themselves and need to correctPrime Minister Narendra Modi at the Startup India Campaign in New Delhi over the weekend Modi outlined a slew of measures under Start Up India including exempting startups from income tax for their first three years AFP PhotoSTRLoss seasonIn sectoral gainers there was just one in BSEIT up 096 per cent led by Infosys which announced a set of better than expected numbers and gave some respectability to the falling benchmark indices The losers were led by BSECAPGOODS down 666 per cent and closely followed by BSEPOWER 645 per cent and BSEBANKEX 616 per cent BSEREALTY fell 776 per cent In individual stocks there was no surprise that Infosys was the top gainer up 724 per cent followed by Reliance Industries 479 per cent The losers were led by Idea Cellular down 1542 per cent followed by BHEL 1119 per cent The banking sector was under tremendous pressure and both PSU and private banks felt the tremors and heat of the falling market Canara Bank lost 1818 per cent Union Bank 1707 per cent Punjab National Bank 1241 per cent State Bank of India 1158 per cent and Bank of Baroda 1028 per cent Axis bank was down 971 per cent and ICICI Bank 833 per centGlobal pressureThe pressure in markets was global and Dow Jones lost 35837 points or 219 per cent to close at 1598808 points These levels were last seen in August 2015 and the current levels on the SENSEX and NIFTY were last seen in May 2014 The Indian Rupee too was weak and lost 97 paisa or 146 per cent to close at Rs 6760 FIIs were sellers and domestic institutions were buyers as is the trend when markets are weakThe current month NIFTY futures which expires on January 28 is already down by 500 points or 640 per cent Bears have a complete upper hand and are in total command The sharp fall over Friday would see margin calls first thing on Monday and the fact that Dow Jones lost sharply on Friday will not help mattersStartups incentiveThe Prime Minister has committed funds to startups and announced a fund for the same with some incentives and ease of doing business recognising the need of the hour The Vice President of the Congress party speaking to students in a Mumbai business college has said that they Congress are willing to pass GST provided that some conditions are metThere is a global crisis currently on and the geopolitical issues are adding fuel to the fire If in such an environment important bills like GST actually see the light of day it could be a turning point in the economyHindustan Unilever results were far below expectations and the company has made a surprise announcement of the board approving the transfer of its general reserves to the PampL account for distribution to shareholdersWhile this is subject to the permission from regulators the High Court and shareholders this would be probably be the first of its kind event A sum of over R 21000 crore would be transferred in this manner resulting in a dividend including tax of around Rs 9597 per share While it may sound good it will take a long time considering the procedures involved and the parent company which owns 23rd of the company would become the biggest beneficiaryRecovery timeThe results season would continue to be the key domestic driver for markets while globally it would be China and its reaction from Dow All indications are that with a weak Dow on Friday night and margin calls today in India markets would suffer loses at the open Thereafter it would depend on value buying happening or not for the recovery The correction in midcap and smallcap has just started and though there can always be some correction before the fall begins again it makes sense to only watch that space and not make investments at current levels until valuations become affordableChoppy markets would be the order of the day with downward pressure at the beginning Avoid intraday activity as the volatility hits you adversely and one cannot be sure whose position gets liquidated all of a sudden The right approach would be to allow markets to settle down and buy on the up tick rather than trying to pick the bottom