The week gone by was eventful and volatile. We first had January futures expiring on Thursday the 31st of January followed by the interim budget on Friday the 1st of February. Markets began the week with losses and recovered very sharply on Thursday. They continued their good showing even on budget day. FII’s have been buyers over the last few days and that added to the strength in the marketplace. BSESENSEX gained 443.89 points or 1.23% to close at 36.469.43 points. NIFTY gained 113.15 points or 1.05% to close at 10,893.65 points. BSE100, BSE200 and BSE500 were up 0.91%, 0.80% and 0.71% respectively. BSEMIDCAP was down 0.28% while BSESMALLCAP lost 0.36%.
Dow Jones gained 326.69 points or 1.32% to close at 25,063.89 points. January Nifty futures expired on a positive note and closed at 10,830.95 points, a series gain of 51.15 points or 0.47%. This was an extremely choppy series and neither the bulls nor the bears were in control of the same. The markets kept on oscillating in a broad plus/minus 200 points range, with the bulls finally winning a closely fought series.
Friday saw the interim budget being presented and the government finely balancing populism and assuaging the hurt feelings post losses in three crucial states of Madhya Pradesh, Chhattisgarh and Rajasthan. The small farmer has been provided with an assistance of Rs 6,000, the middle class with effectively a monthly salary of Rs 60,000 and investing the maximum amount of Rs 1.5 lacs under 80-C would pay no income tax. Further the worker in the unorganised sector has been provided a pension of Rs 3,000 per month post attaining the age of 60 years on payment of Rs 100 per month. There has been some maths used in managing the fiscal deficit even after providing Rs 75,000 crs for the farmer scheme. This money would come from a larger dividend from RBI and the expectation of better and buoyant tax collections.
A primary issue after almost five months, Chalet Hotels Limited tapped the capital markets. Merchant bankers believed that this issue would revive the capital market. The issue was a fresh issue of Rs 950 crs and an offer for sale of 2.4685 cr shares in a price band of Rs 275-280. The issue required about 3.91 lac application forms in the retail segment based on the minimum application of one lot. It however received a pathetic 5,250 application forms. The issue was overall subscribed 1.57 times with QIB portion subscribed 4.66 times, HNI 1.10 times and Retail 0.03 times. Such a poor response from retail has not been since in a very long time. There was no way that this issue could revive sentiments of the primary market.
The one simple reason for the lukewarm response was the valuation. The sector is doing nothing and has not made decent money even in a decade. When a new issue comes to the market one expects reasonable valuation and appreciation in the medium term. When that is not there why bother to apply. This is exactly what retail did and just ignored the issue. Hope promoters and merchant bankers take the necessary cues from the above.
The week ahead would see RBI hold its monetary policy review, where it is widely expected that rates would be unchanged. The clamour for rate cut has stopped and with a new burden of Rs 75,000 crs where there would be payment in this fiscal as well, the fiscal deficit could be under strain. While inflation is under check, there could be pressure on bond yields.
The strategy to be adopted should be to sell on rallies and buy on sharp dips. Results from the larger companies are giving comfort and there appears to be a turnaround in the banking space. PSU bank results are indicating that the NPA issue has bottomed out. The change in the top management of the private banks has also happened and things are settling down. Along with banking, IT looks another sector to focus on.
Markets would continue to be volatile and they have individual companies to play with daily which would keep traders happy. A new stock added is Vedanta where issues of selling Trust shares to the listed entity have taken investors and proxy advisers unaware. The stock was down sharply on Friday.
