Markets were under pressure and lost ground last week. They were down on each of the four days that trading took place. The BSESENSEX lost 668.50 points or 2.49% to close at 26,150.24 points. NIFTY lost 222.20 points or 2.68% to close at 8,074.10 points. The broader market saw BSe100, BSE200 and BSE500 lose 2.79%, 2.94% and 3.10% respectively. BSEMIDCAP lost 3.14% while BSESMALLCAP lost 4.93%. The correction in midcap and smallcap has begun and it would take quite some time before the values recover. There is pain in this segment.
Since the beginning of November, SENSEX is down 6.37%, NIFTY 6.39%, MIDCAP 10.40% and SMALLCAP 13.62%. Values of stocks in the midcap and smallcap have lost anything between 30-50% signifying the pain in these sectors. FII’s in the current month have sold shares worth Rs 2,900 crs and in the last five trading days as much as Rs 7,650 crs.
Gold has fallen below the level of 29,000. One would remember that there was a huge premium on gold of anything between 40%-50% by panic stricken buyers wanting to get rid of 500 and 1000 notes. Their value has depreciated even though the rupee lost significant ground losing 88 paisa or 1.31% to close at Rs 68.13 to the US dollar.
There is a primary market issue which is currently open from Green Signal Bio Pharma Limited. This is an issue with 75% of the issue size reserved for QIB’s and 15% and 10% being the HNI and Retail portion. The issue has been extended a second time and would now close on 22nd November. The first extension which was done was without reducing the price band which is mandatory. The explanation offered was that the banking system was disrupted because of the 8th November demonetisation. Surprise of surprise was that even on that day when the issue was extended retail portion was subscribed over 5 times. The demonetisation effect would be most felt by retail but they had already subscribed the issue. It should not have affected QIB’s. Strange are the ways the regulator works. As of Friday which was the 7th day of subscription the retail portion is subscribed 8.91 times while there is not even a single bid received from QIB’s. It looks difficult that this issue would go through and it would be nothing short of a miracle if it does. A new precedent has been set by the regulator which does not seem justified in any manner whatsoever.
Markets are oversold and a technical pullback is on the cards. This should be used to exit long positions as the pain would be there for quite some time. Quarter two have not given comfort and quarter three post the demonetisation has taken a hit. Downgrades from brokerages are on the cards and should start happening in the next fortnight. Trade with extreme caution as though values may look attractive post the correction they are certainly not cheap.
