Markets continued to remain choppy and gained on two trading days, lost on two days and was flat on the fifth day. BSESENSEX lost 163.83 points or 0.41% to close at 39,452.07 points while NIFTY lost 47.35 points or 0.40% to close at 11,823.30 points. The broader indices saw BSE100, BSE200 and BSE500 lose a little more at 0.51%, 0.60% and 0.70% respectively. Dow Jones gained 105.67 points or 0.41% to close at 26,089.61 points.

Markets are moving in a range with support on the NIFTY around the 11,700-11750 level and BSESENSEX around 39,200-39,400 levels. Previous tops are the resistances for both the indices. Markets seem to be drifting currently and need some strong news flow for the breakout in either direction to happen. There doesn’t seem to be any news which has the power to drive markets at this time. The next big planned news would be the budget due on 5th of July. The possibility of the downward breakout is greater and that could be countered by fresh buying from FII’s who are positive on the country.

India has levied higher retaliatory duties on 28 American products in lieu of being denied preference under its ‘GSP’ programme. The trade war seems to be escalating. Reconciliation between US and China on this issue seems to be difficult at this point of time with both sides taking a tough stance. With more and more countries being targeted, the time when Americans start feeling the pinch on day to day items which are currently imported is not far off.

SEBI wants to come down very heavily on insider trading and has floated a consultative paper or invited suggestions on incentivising whistle blowers to tackle this issue. SEBI proposes to pay up to 10% of the amount levied or disgorged subject to an upper cap of Rs 1 cr. While in perspective this looks a good idea, one needs to learn from what happened with the India Bulls group companies last week. A lawyer Kislay Pandey of the Supreme Court filed a complaint against the company and the promoter, accusing him of siphoning off Rs 98,000 crs. The track record of the lawyer leaves a lot to be desired. Further the so-called investor on whose behalf the lawyer filed the petition, had bought just 4 shares during the month of May. Incidentally he is a milk vendor by profession and is a history sheeter.

The point being made here is that a complaint which is frivolous in nature is widely circulated, digital and social media is used to spread the news and cause panic in the share and then the complaint itself is withdrawn. Even filing the complaint and then withdrawing costs a lot of money. Who financed the entire operation and what was the purpose? Surveillance measures in the stock exchanges are quite robust to find out who traded, what time, what price and also what quantity. This can be also tracked with whether the trade was squared off or continues to remain open. With such systems in place, it is difficult to imagine that short term trading and profiting was the objective. While hundreds of investors in the company India Bulls Housing have lost a fortune as the stock fell around 20% during the week which before recovering to close at Rs 672.10, a loss of Rs 62.75 or 8.29%, one still doesn’t know who benefited or what was the objective. I strongly believe that this case is not yet over and more will follow in the coming days and weeks.

The most unfortunate part of the issue is the fact that shareholders particularly the smaller ones have lost for no fault of theirs. There must be legislation on preventing such occurrences in the future and what better time than now when SEBI is considering incentivising whistle blowing.

Coming back to the SEBI matter on whistle blowing, there have to be very strong deterrents for bogus and flimsy complains or so-called insider trading information given for the reward. In case the same is bogus, a withdrawal or apologising should not solve the matter. The person should be made to pay for the so-called losses suffered by various stake holders. In any case this is the beginning of the issue and there is a long time to go before it becomes law.

The week ahead would continue to remain choppy and volatile. As mentioned earlier markets are looking for direction and for a breakout or breakdown in prices. Until and unless markets move decisively, they will continue to trade in this limited range and remain listless. This break out or breakdown is likely to happen before June futures expire on Thursday the 27th of June. The reason why I believe so is the budget rally would have begun. Trade cautiously and only short the market with adequate stop losses.

It was an eventful four-day trading week in which markets made new lifetime highs. The BSESESENSEX touched a new high o 40,312.07 points while NIFTY touched 12,103.05 points. Markets gained on two days and lost on two. BSESENSEX lost 98.30 points or 0.25% to close at 39,615.90 points while NIFTY lost 52.15 points or 0.44% to close at 11,870.65 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 0.52%, 0.59% and 0.68% respectively. BSEMIDCAP lost 1.26% and BSESMALLCAP lost 1.41%.

The closing levels do not give the sense of trading volatility that happened during the week. The high made during the week was 40,312.07 points and the low 39,279.47 points. The swing was 1,033 points and the close reflected a mere change of 98 points. Similarly, on the NIFTY, the high was 12,103.05 points and low 11,769.50 points, a range of 334 points and the net change 52 points.

Dow Jones had a stellar week with it gaining a massive 1,168.90 points or 4.71% to close at 25,983.94 points. The expectation is that US FED is willing to cut interest rates repeatedly to inject growth in the economy. The Indian Rupee gained 21 paisa or 0.30% to close at Rs 69.47 to the US Dollar.

RBI cut interest rates on expected lines by the customary 25 basis points. Repo rate is now 5.75% and it is at its lowest level since 2010. What is important to note is that the stance has been changed from neutral to accommodative and this indicates that more cuts could follow.

It is on the NBFC front that not much has happened and while the contentious circular struck down by Supreme Court maintains its spirit, the same looks mildly different in reading. The crux of the problem being faced by NBFC’s is that they have been lending to riskier propositions and charging higher rates of interest and trying to maximise profits. In this process they have been taking risks far greater than what even banks would take when lending to lower rated borrowers. When issues emerge in the market place, it first affects the lower rated clients and this is what has happened.

Another issue that has cropped up with the housing finance NBFC’s is their exposure to bulk loans and developers. With a slowdown in the realty space, they are stuck with no rotation of their loans and the developer not able to pay up as he is not having sales of property. It truly is a ‘catch 22’ situation. What can RBI actually do in this situation or putting it in another way, what do people expect RBI to do when lenders have not followed prudent norms beats me.

Monsoon has hit the coast of Kerala on Saturday. It is delayed by about a week. It would travel over the next 5-10 days to break over Mumbai, the financial capital of India. The progress of monsoon over the rest of the country, its impact positive and negative on various sectors would now become a talking point for the electronic media. They would ask guests on which sectors would do well and which would get impacted as a result of the monsoon.

The next leg of the rally should see the markets becoming broader based and encompass the midcap and small sectors as well. So far, the same has not happened but hopefully it would. The Union budget is to be presented on the 5th of July and budget expectations and wish lists would become the talking point in about ten days’ time. While expectations are largely not met or fulfilled, some part of it does materialise. It would be interesting to see what the market is expecting this time around.

There seems some light at the end of the tunnel in the DHFL case. They have paid the interest and the principal due to fund houses from the sale proceeds of their investments. The proceeds from sale of stake in Aadhar Housing Finance Limited sold to Blackstone is likely to happen in a day or two. If this happens, a large part of liquidity mismatch would temporarily get adjusted.

Coming to the week ahead one would see markets remaining choppy and volatile. There would be sharp bouts of rise and fall as a significant segment of people believe everything is priced in and there is no reason for markets to rise. When there is buying, this leads to short covering and bulls have their say. Similarly, when nothing happens or institutions sell, markets become listless and they tend to fall. This is when bears take the upper hand. This would continue with markets remaining in a broad range. Buy on dips and sell on rallies. There will be plenty of such opportunities.