Use initial positive momentum to your advantage in turbo-charged last week of the year 2017
Markets were extremely volatile last week, specially Monday when results for the state assemblies were declared. There was panic on the street when n the initial phase of counting, when the Congress went ahead of the Bharatiya Janata Party (BJP) in Gujarat. The net result was a major swing on the indices on that day. The BSESENSEX made a low of 32,595 points on Monday and a high of 33,801 points, an intra-day swing of 206 points before closing at 33,601 points, a net gain of 139 points. NIFTY similarly had 10,388 points, a gain of 55 points.
Prime Minister Narendra Modi and BJP President Amit Shah at a felicitation function in New Delhi after the party’s win in Gujarat and Himachal Pradesh Assembly elections. Pic/PTI
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The BJP retained Gujarat in a tense and closely followed election winning 99 seats out of 182 seats. In Himachal Pradesh, they upstaged the ruling Congress winning 42 of the 68 seats in the state. These election results have been a win-win situation in more ways than one.
Shock treatment
Many believe that the BJP was getting over confident and losing touch with ground reality. They needed a shock treatment and to be brought down to earth. By being given a fight in Gujarat it has been done. Secondly, the Congress is yet to get its act together and this result shows the Congress that people are willing to look at them provided they get the act together. Thirdly, all the noise about demonetisation and GST has been proved to be incorrect with results from Surat and all other urban cities of Gujarat where the BJP has performed very well. It shows that people are for reforms and are willing to go with them. The one place where the party had a setback was in Saurashtra where the cotton price issue and patidar movement hit the ruling party. In short, this would put BJP on alert and help in the coming elections in Karnataka.
New highs
Coming to the markets, the BSESENSEX made new highs and gained 477.33 points 1.41 per cent to close at 33,940.30 points. NIFTY gained 159.75 points or 1.52 per cent to close at 10,493 points. The broader markets saw the BSE100, BSE200 and BSE500 gain 1.69 per cent, 1.95 per cent and 2.16 per cent respectively. BSEMIDCAP gained 3.41 per cent, while BSESMALLCAP was up 4.32 per cent. In sectors, the top gainer was BSE REALTY up 4.59 per cent followed by BSEMETAL 4.54 per cent and BSEPOWER 3.99 per cent. BSEAUTO too put up a strong show gaining 3.85 per cent. There were no sectoral losers, but the one to gain the least was BSEBANKEX up 0.83 per cent. In individual stocks, the top gainer was Hindalco up 9.32 per cent followed by Hero Moto 7.50 per cent and Vedanta 5.79 per cent. The top loser was Kotak Mahindra Bank down 1.98 per cent followed by Yes Bank 1.94 per cent and Coal India 1.90 per cent. The Indian Rupee was virtually unchanged losing one paisa or 0.02 per cent to close at R 64.05. Dow Jones continued to gain ad post new highs. During the week it gained 102.37 points or 0.41 per cent to close at 24,754.06 points.
Short week
In primary market news, the issue from Astron Paper Limited was oversubscribed a massive 243.29 times. QIB portion was subscribed 103.36 times, HNI 396.99 times and Retail 77.93 times. Surplus liquidity continues to be the driving force behind the markets. The week ahead begins with a Christmas holiday today. This short trading week would see December futures expire on Thursday and the calendar year end of Friday, December 29. The current value of NIFTY at 10,493 gives bulls a lead of 266.45 points or 2.54 per cent. It is a good lead and markets looking positive in the immediate short term, give bulls an upper hand. While BJP has not done too well in Gujarat, it is still enjoying the market's confidence is a good thing. It is great for the markets and is the best verdict that could have been asked for.
The budget
Going forward one can safely predict that the next budget in February 2018, which would be the last budget before the election in April-May 2019, would be directed in providing relief to the common man. It would be election oriented and would have plenty of sops. The ruling government would like to take no chances. With such a vantage position, the budget would not be market friendly and is likely to impact the markets negatively. I believe that we are near a near term top and it is a matter of time before a meaningful correction in terms of both value and time begin.
Looking ahead
The year ahead would be a time for self-inspection and introspection. Market thinkers and people who matter to whom I spoke, strongly believe that returns next year should be moderated. Against the more than 25 per cent returns in 2017, high single digit returns to at best low double digit is what people should expect. This effectively means we are talking of a range of 8-14 per cent for next year. The week ahead would be volatile with a positive bias in the initial first half of the week. There could be a correction towards the end of the week after NAV propping is over. Use the positive momentum expected, to take advantage of exiting any sharp moves in thinly traded shares. Wishing all a Merry Christmas and a happy New Year 2018.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
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.
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