The week gone by began on a positive note and gained on the first three days. Then on Thursday on account of weekly expiry of NIFTY and Bank Nifty it surrendered the gains of the first three days to become flat for the week. Finally, we had a sell off on Friday where markets lost ground substantially when the Finance Ministry made it clear that there would be no change with regard to surcharge for FPI’s as well. The net result at the end of the week was that BSESENSEX lost 399.22 points or 1.03% to close at 38,337.01 points. NIFTY lost 133.25 points or 1.15% to close at 11,419.25 points. The broader market saw BSE100, BSE200 and BSE500 lose 1.31%, 1.43% and 1.57% respectively. BSEMIDCAP lost 3.27% while BSESMALLCAP lost 3.38%.
The top sectoral loser was BSEAUTO down 5.85% while the top gainer BSEIT was up 2.34%, The top gainer in stocks was Infosys up 8.12% while the top loser was Yes Bank down 11.58%. The Indian Rupee lost 12 paisa or 0.17% to close at Rs 68.80. Dow Jones lost 177.83 points or 0.65% to close at 27,154.20 points.
The week ahead sees July futures expire on Thursday the 25th. The current level of NIFTY at 11,419.25 points is down 526.65 points or 4.41% compared to June expiry of 11,945.90 points. With such a big advantage that the bears currently have they should easily be able to win the month by a big margin.
Readers would recall that post the announcement of exit polls on Friday evening on the 17th of May, all exit polls were more or less unanimous that the NDA would be back in power. Markets opened with a big gap when trading resumed the following Monday and results were announced on Thursday the 23rd of May. This gap began at 38,001 points on the BSESENSEX. The similar level on NIFTY was at 11,426 points which was just about breached on Friday. Effectively markets have given up the entire gains made post the gap up opening. Support exists for the market between 38,000 and 38,200 on the BSESENSEX and around 11,100 on NIFTY. These as of now look like they should hold in the short to medium term.
The advent of weekly futures on the two indices on NSE, namely NIFTY and Bank Nifty have increased volatility in the markets considerably. While markets may be fairly rangebound on four of the five days, come Thursday its super volatile. Not sure whether it adds to people’s wealth or erodes it. It certainly makes markets more difficult to understand. The week ahead sees both weekly and monthly expiring and this could make markets really volatile on Thursday.
Market players are looking for safety and are willing to pay a premium for the same. Take the case of HDFC AMC which saw its share price rise by 19% in a single week from Rs 1,947 to Rs 2,316. The company reported a good set of numbers even after SEBI had reduced the fees that an AMC could charge. This has actually turned out to be an entry barrier for new AMC’s as it has become that much more difficult to get a corpus for new funds from such houses. The share price of HDFC AMC has more than doubled from its issue price of Rs 1,100 in under a year. The EPS for the year ended March 2019 was Rs 43.78 and it is Rs 13.69 for the current quarter ended June 2019 versus Rs 9.68 in the year ago.
Reliance Industries declared its results and the revenue per person in the case of JIO has fallen. While the overall results show a growth, its refining and petrochemicals business were sluggish. This was offset by a strong show from retail and digital services business. The company has brought in Brookfield as an investor in its tower business at an investment of Rs 25,215 crs. This money would be used to repay debt amongst others. JIO will now pay rent on the use of towers going forward.
A key indicator from this is the fact that the IPO from JIO is that much closer now. While it would be just hazarding a guess, the same happening in around 12 months’ time is doable and could keep markets guessing.
The response from retail investors for the 5th tranche of the follow-on fund offer of CPSE ETF was indeed overwhelming with the same being subscribed over 5 times. Against the offer size with green shoe option being Rs 11,000 crs, bids were received for over Rs 40,000 crs. The discount too was cut by 0.5% to 3%. This happened on the day the markets fell so sharply on Friday. Incidentally the price of CPSE ETF gained 6 paisa on Friday from Rs 25.29 to Rs 25.35.
The week ahead would be volatile on account of the upcoming expiry. It would look to find support at some lower levels after being beaten down during the last two days. Shorting the market at these levels could be dangerous and investors would be well advised to look for buying support rather than shorting.
