Markets in uncertain times

The markets managed gains but there is no direction. The BSESENSEX clocked gains of 1.79% and NIFTY 1.90% in a choppy week. The two mega results from TCS and Infosys gave an impression that the environment is challenging and times tough. They fared reasonably under the circumstances but we need to be circumspect about the times and expected performances.Infosys and TCS both lost ground on Friday post results while TCS lost 1.38% for the week, Infosys gained 0.38% on a weekly basis.

Dow Jones is struggling at the 20k level and it is over a month that the same has attempted unsuccessfully to cross Mount Everest. The mark seems elusive and much more difficult than 150 points should be. The US President would be sworn in next week.

The week ahead sees the follow on fund offer from CPSE-ETF launched. The size of offer is Rs 6,000 crs and would have an anchor portion of 30%. The entire balance of Rs 4,200 crs has a first choice for retail investors. In case of it not being subscribed it would spill over to pension funds and then to HNI’s and QIB’s. There is a 5% discount for all applicants who are allotted units. The present units from the fist fund offering closed for trading at Rs 26.85 on Friday the 13th of January. I believe the fund offering is good and the skewed nature of its holding in favour of energy and oil would benefit investors with oil prices having bottomed out and firming up. Secondly the element of subsidy no longer exists unlike 2014 when there was a large and uncertain subsidy component which had to be borne by these companies.

A note of caution this being a mutual fund the application would be by cheque not through ASBA. Secondly there are procedures to be followed like KYC etc which have to be completed before the form is submitted. Please do the needful right away so that you do not get disappointed when the issue is closing on Friday.

Tata Sons have appointed N. Chandrasekaran as the new Chairman of Tata Sons on expected lines. He was tipped to succeed ousted Chairman Cyrus Mistry after the spat. The present head of TCS has been a Tata professional for over 30 years and has a long career ahead of him as he is currently aged 53. A low key professional with an excellent track record is what Chandra brings with him. He would take over as Chairman on 21st February.

The election commission has reserved its order on the claims of Mulayam Singh Yadav and his son Akhilesh Yadav in the Samajwadi party dispute on the election symbol. The likely outcome is the freezing of the symbol for the current election. This would be bad news for both the factions as India still votes for a symbol and this could lead to a loss of votes for both factions.

Markets need more clarity as to the trend. Wait for the same.

Performance of Newly Listed Shares as on 13th January 2016

Name Date of listing Issue Price closing price closing price % gain loss change over
13th January 6th January over week lssue price
L&T Technology Services Limited 23rd September 860.00 808.35 812.85 -0.52 -6.01
GNA Axles Limited 26th September 207.00 203.25 198.30 2.39 -1.81
ICICI Prudential Life Insurance Co Ltd 29th September 334.00 331.85 331.00 0.25 -0.64
HPL Electric & Power Limited 4th October 202.00 118.80 102.10 8.27 -41.19
Endurance Technologies Limited 19th October 472.00 587.70 561.65 5.52 24.51
PNB Housing Limited 7th November 775.00 808.05 812.30 -0.55 4.26
Varun Beverages Limited 8th November 445.00 413.00 411.70 0.29 -7.19
Sheela Foam Limited 9th December 730.00 988.00 968.30 2.70 35.34
Laurus Labs Limited 19th December 428.00 492.70 471.90 4.86 15.12

Markets looking vulnerable

Markets managed gains in the last week but seem to have become extremely vulnerable. The BSESENSEX gained 132.77 points or 0.50% to close at 26,759.23 points. NIFTY gained 58 points or 0.71% to close at 8,243.80 points.

Against this rise, sample the fall from Friday’s intraday high of 27,009. The fall from the high to the close was 250 points which is almost double of the weekly gains. One single day extreme volatility was witnessed and technical signals have issued alerts. Another way of looking at the same thing is that the fall was so much more than what the market struggled to gain over four days. On the NIFTY the high on Friday was 8,306.85 points. The fall was 63 points against the weekly gain of 58 points, a variation of 1.1 times.

IT stocks bore the brunt of the selling and registered huge losses. The big concern currently is lack of triggers and markets gaining for absolutely no attributable reason whatsoever. Volumes are thin and institutional activity fairly low. In such a scenario it makes trading difficult and dangerous.

Elections have been notified in five states. They begin with Punjab and Goa going to the polls on 4th of February. These are followed by a five phase poll which begins in Uttar Pradesh on the 11th of February and ends on 8th of March. In between Uttrakhand would go to polls on 15th of February and Manipur on the 4th of March. Counting would be held on Saturday the 11th of March. The elections are being held in the backdrop of demonetisation and would be seen as a referendum on the 32 month old BJP led NDA government.

The Union Budget is to be presented on the 1st of February. There would be no separate Railway Budget and it would be a part of the Union Budget. Both houses of Parliament would convene on 231st of January and would be addressed by the President. The opposition is currently opposed to the budget being presented before the elections. The shifting of the budget is an exercise which has been going on for over two months. While there is an appeal pending before the election commission it appears unlikely that anything would come out of it.

The US is again debating H1-B visas. They want jobs to be given to locals and the cost to be incurred by hiring a local against the offshore person would increase costs from 60,000 dollars to 100,000. This would impact the margins of software companies significantly in the short run. With TCS due to announce results on Thursday the 12th of January and followed by Infosys on Friday the 13th, one hopes there would be clarity on the issue and the sector.

Markets are looking vulnerable and results for the quarter would decide further course of action that they take. Stay on the sidelines and use rallies to sell while sharp dips would be opportunities to buy. We are in what one could say is a drift mode or directionless mode.

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