Gas prices trigger Friday frenzy

The market was weak in the initial part of last week and then rallied on expiry On Friday it was simply going crazy post the increase in gas prices from 42 per MMBTU to a staggering 84 effective April 2014 The SENSEX gained a staggering 843 points in two days while the NIFTY gained 253 points The SENSEX ended last week with gains of 62157 points or 331 per cent to close at 1939581 points The NSE NIFTY gained 17455 points or 308 per cent to close at 584220 points The broader indices gained less with the BSE100 BSE200 and BSE500 gaining 243 per cent 208 per cent and 181per cent respectively The BSE MIDCAP lost 121per cent while the BSE SMALLCAP lost 129 per cent Neigh to go With petrol prices at their highest will would we be forced to ride on horseback PicSuresh KK Sectors The rally affected almost all sectors and there were gains in almost all the sectoral indices The top gainer was BSE OILwhich gained 659 per cent The other gainers included BSE IT up 406per cent BSE BANKEX up 224 per cent and BSE HEALTH up 217 per cent The losers were led by BSE CON down 598 per cent The only other loser was BSE FMCG down 046 per cent The top gainer in individual stocks was Reliance Industries up 856 per cent Other gainers included IFCI up 1057 per cent ONGC up 718 per cent and Hindalco up 657 per cent The losers were led by Gitanjali Gems down 5332 per cent MMTC down 2252 per cent and Tata Communications down 1156 per cent and Ranbaxy down 1130 per cent Gas The week saw June futures expiring at 568235 points a monthly loss of 421 points or 721 per cent There was a smart recovery on expiry day and markets gained almost 175 per cent The next day saw a great rally on account of the gas prices being raised to double What is surprising is that while the output prices of gas have been raised the effect of what this would do to users like fertilisers and gas producers is yet to be considered Comments from the Finance Minister FM P Chidambaram on the issue suggest that there would again be a subsidy element that would be there Yet another concern is that why should gas prices be fixed in dollars and not in Indian Rupees Rupee The Indian Rupee depreciated to its lifetime low of Rs 6076 and recovered from these levels to close at Rs 5939 a weekly loss of Rs 012 or 020 per cent The run on the Indian Rupee saw FIIs selling debt and equity with net sales of Rs 8470 crore in debt and Rs 3120 crore in equity The sales in June have been staggering at Rs 31340 crore in debt and Rs 10530 in equity These sales in excess of 7 billion dollars in a single month put pressure on a vulnerable Rupee or vice versa where the falling Rupee forced FIIs to sell more and added more pressure to the rupee Domestic institutions sold Rs 202 crore last week and a mere Rs 100 crore in the month One must remember that activity of LIC is not included in the final figures of domestic institutions The CAD Current Account Deficit for the JanuaryMarch 2013 quarter was at 36 per cent while that for the whole year was at 48 per cent or 45 billion The depreciating Rupee took its toll on petrol prices which were raised Rs 182 per litre Petrol prices in India are at their highest level ever and this would have a bearing on inflation going forward One must also remember that RBI would be meeting for its review meet at the end of July and if inflation which fell for a couple of months again rises RBI maybe constrained to keep interest rates unchanged Risks Open interest in the new July series has opened roughly 20 per cent below the corresponding level of June series indicating that shorts have been either squared off or allowed to expire The rally in the last two days has made the markets hollow and now vulnerable going forward On a day when markets went up on the gas price revision it is surprising to note that PSU exploration company OIL India was actually a net loser of 05per cent while shares like Reliance and ONGC rose between 3 and 4 per cent simply because this share is not traded in futures This rally seems deceptive and lacks conviction The week would be choppy and it would be advisable not to get carried away with the Friday Feel good factor after the twoday rally Key levels for the SENSEX are 18975 and 19700 while similar levels for the NIFTY are 5705 and 5935 respectively The BSE SENSEX has support at 19181 then at 19093 points then at 18841 points then at 18688 points and finally at 18514 points It has resistance at 19521 points then at 19711 points then at 19861 points then at 20109 and finally at 20241 points The NSE NIFTY has support at 5776 points then at 5673 points then at 5616 points and finally at 5566 points It has resistance at 5880 points then at 5941 points then at 5983 points and finally at 6038 points Trade with extreme caution and do not get caught in the euphoria around you Use all rallies to exit and if you are a risk taker short fresh rallies are the way to go Arun Kejriwal is founder of the Mumbaibased advisory firm Kejriwal Research amp Investment Services Pvt Ltd Readers are invited to read more about these and other issues on his website httpak57in 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 and under no circumstances should be used for actual trading or making investment decisions Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions based on information published here Any reader taking decisions based on any information published here does so entirely at his or her risku00a0