Markets were weak through the week and though the net weekly loss was a mere 294.75 points on the BSESENSEX and 94.35 points on NIFTY, the feeling was much worse. The momentum has been broken, FII’s buying interest has turned to selling and investors seem to be losing patience. I am not suggesting doomsday but very clearly the rally of the last two to three months is over. We need to consolidate and regain momentum before the next leg of the rally begins.
Week after week the market is getting a stock which literally goes crazy and hits circuit after circuit. Some time ago it was news of “Being Human” demerged out of Mandhana industries, then it was Max, and more recently it was Aditya Birla Nuvo. Last week was the turn of textile and home linen maker’s Welspun India’s turn. The share hit circuit breakers and closed at Rs 49.70, a weekly loss of Rs 53.15 or 51.68%. What triggered the fall? A review of the cotton procured by the company by one of Welspun’s large buyers. The question was the use of Egyptian cotton in the bed sheets. One must remember that Egyptian cotton production is on a sharp decline and is now down to just under 2% of global cotton production. How on earth so much of ‘Egyptian’ cotton fabric could be produced in the world. It’s a similar situation to the amount of scotch whiskey consumed in India and actually produced in Scotland. Yet another example could be basmati rice production.
To cut a long story short, an issue has been triggered for reasons best known to interested parties and provided an opportunity to relook at the company at half the market price. Take a concerted look at the fundamentals and decide on the timing to enter the company.
In primary market news, the issue from RBL Bank Limited was subscribed almost 69 times with the HNI portion a massive 198 times. It appears the lower rate of funding is driving a new breed of HNI’s to leverage and apply. How long this would be sustainable is anybody’s guess.
In conclusion use market rallies to sell and wait for the correction.