There was plenty of action in Diwali week and the market rose significantly. In the short three day week the BSESENSEX gained 678.60 points or 2.60% while the NIFTY gained 316.20 points or 2.78%. The broader indices gained similar. Diwali Muhurat trading for Samvat 2071 began on an auspicious note and the SENSEX gained 63.82 points while the NIFTY gained 18.65 points. A good positive and auspicious start and one would hope that the uptrend continues. In the previous Samvat 2070 the markets had gained 26% for the year and it looks like a tough call to beat that number this year. The base has expanded and the pessimism of last year replaced with optimism. The markets would now gain primarily on two counts, one being performance of companies and second reforms introduced by the government.
The state of Maharashtra would have a new government headed by BJP and supported by Shiv Sena. Post the two alliances breaking, results show that the coin has turned with the junior partner in the state BJP has now become the senior partner. While mathematically the two parties may have lost some seats this turnaround could never have happened without the breakup. Secondly it has put a lot of ego and hot heads in place, something which augurs well for the prosperity for Mumbai and Maharashtra.
The open offer for Mangalore Chemicals from Deepak Fertilisers and Zuari has closed with preliminary data showing that Deepak has received 6%shares in the open offer. In the last week post the closure on Monday of the offer the price of Mangalore Chemicals has fallen from the Rs 94-95 to Rs 88.55 as of Thursday. The share is likely to be under pressure in the coming days what with the plant having received a closure notice.
There were three back to back IPO’s which listed within a three week period in September-October. Interestingly all three had their names beginning with the letter “S”. The three were Snowman Logistics, Sharda Cropchem and Shemaroo Entertainment. All three were oversubscribed and allotment to the retail category was by way of lottery of one lot. While Snowman and Sharda are trading with gains of 112% and 60% as on date, Shemaroo is struggling and is currently down 4%. This is inspite of the fact that they have a white knight in the form of HDFC mutual fund who was an anchor investor, first day buyer and also subsequently topped up his holding after that. What is it that this fund house likes in this hare that others don’t like is indeed unknown to me and only time will prove who is correct.
Elections to the states of Jharkhand and J&K have been announced and the first round would be on 25th November and results announced on 23rd December. This would be another keenly fought election in the backdrop of the split of the BJP and JDU in Bihar and the general feeling that the ruling NC (National Conference) was inactive in the recent floods that hit the state.
The government has sent the ordinance on coal blocks to the President and the time taken was less than four weeks since the Supreme Court gave its final order. The process of e-auction and transparency would send strong signals to investors looking to invest in India. Further the release of orders for Rs 80,000 crs for the defence which includes a substantial amount for technology transfer and public-private partnership would go a long way in strengthening local manufacturing capabilities with latest state of the art technology and at substantially lower costs.
Markets are well poised and at critical levels. We need to continue to see gains and developments on the political front to keep the appetite of this market going. FII’s have to be the key to the rally and their buying support will help the market in no small mean.
Taper your expectation of returns to the long term average of the markets which is about 15% and invest for the medium term. Short term gains disappear faster than they accrue.
Wishing all a Happy Diwali and Prosperous New Year.