A week can be a very long time and last week was a classic example. It began with the markets
falling very sharply and the BSESENSEX losing just about 4,000 points on Monday. Tuesday saw the markets trading in a comparatively narrow range of just about 800 points on BSESENSEX. Tuesday night was also the time when PM Modi announced a 21-day lockdown beginning 12 midnight of Tuesday the 24/25 th March. Wednesday saw markets gain 2,000 points. Thursday saw the FM announcing measures to ensure that the poorest of poor had food and money to tide over the present crisis. Markets gained 1,400 points on the BSESENSEX. Friday saw RBI announcing rate cuts and measures to benefit the banking system and customers. Markets after gaining initially closed with minor losses of 130 points on BSESENSEX.
The week closed with losses of 100.37 points on BSESENSEX or 0.34% at 29.815.59 points. NIFTY closed with losses of 85.20 points or 0.97% at 8,660.25 points. The broader indices saw BSE100, BSE200 and BSE500 lose 1.52%, 1.92% and 2.23% respectively. BSEMIDCAP was down 5.42% while BSESMALLCAP was down 6.09%.
It would be interesting to observe that BSESENSEX made an intraday low of 25,880.83 points on Monday and 25,638.90 points on Tuesday before staging a sharp recovery for the week. Similarly, NIFTY made lows of 7,583.30 points on Monday and 7,511.10 points on Tuesday. The intraweek highs made on Friday was 31,126.03 before the profit taking and correction post RBI policy. Similarly, NIFTY made a high of 9,038.90 points. In normal circumstances I would have stuck my neck out and said that this was a bottom that we have witnessed but after the setback 2 weeks ago would now say that the signs indicate that probably a bottom has now been established.
The Indian Rupee after a wild week, managed to recover 29 paisa or 0.39% to close at Rs 74.89 to the US dollar. Dow Jones had a torrid week and managed to gain 2,462.80 points or 12.84% at 21,636.78 points. During this period on has witnessed Dow ending the day with gains of 800-1000 points and futures opening with losses of over 600 points. Such has been the volatility that it has changed the trading atmosphere and brought in unheard of uncertainty. March futures expired on expected lines and the series lost 2,991.85 points or 25.72% to close at 8,641.45 points. While there was recovery during the week it just recovered the intraweek losses.
In recognition of the services of the healthcare sector, the government has announced a health insurance of Rs 50 lacs per person involved in the treatment of covid-19 whether it be doctors, nurses or support staff. This would boost the morale of those people who are giving their best for the treatment of the pandemic.
RBI advanced its monetary policy review meeting to be held from March 31 – April 3 and instead held it from March 25- 27. On Friday it announced a cut in Repo rate by 75 basis points from 5.15% to 4.40%. CRR or cash reserve ratio was cut by 100 basis points 3%. Reverse repo rate was cut by 90 basis points to 4%. In a very significant move, it announced that lending institutions can allow 3 months moratorium on EMI’s. Deferment on loans and interest repayments will not be classified as defaulters and will not impact credit history of borrowers.
The FM is expected to announce further measures which would affect positively the SME and MSME segments in the coming week. One announcement which is being looked for is the change in the financial year which would end on 31 st March. With complete disruption having already happened it would be in the fitment of things that the same be shifted to end on 30 th April at the bare minimum or ideally 30 th June. This would ensure better compliance and convenience for all stake holders.
Yes Bank’s dream run post the resurrection is over on the bourses. The effect of the short squeeze caused by 75% of the shares being declared as locked in for three years and therefore non-tradeable is also over. The share was a big loser on the bourses and lost Rs 19.50 or 42.48% to close at Rs 26.50. Post the resurrection, the share prices had run up to Rs 87.95 on the 18 th of March.
There sems to be confusion in the microfinance sector with regards to collection of dues. While one state Tamil Nadu has notified that collection cannot be done, the lockdown implies that it is not possible to collect dues. Further loans given in MFI lending are more to do with relationship of the customer with the lender and long-standing track record. The nature of the business is such that MFI would be advancing loans to meet the current crisis of meeting daily needs. The hammering of these shares seems overdone.
Yet another share which seems to have fallen no end on governance issues and lack of credibility of promoter’s statement is Sterling and Wilson Solar Limited. Shares were issues at Rs 780 and are currently trading at Rs 77.25. The share is down Rs 22.45 for the week and a massive 90.10% from the IPO price of Rs 780. The non-payment of promoter loans as committed remains the key concern.
Covid-19 has gripped the entire world and at last count had already claimed 30,900 deaths and over 6.65 lac affected patients. We need to understand that the advanced countries in the US and Europe are having far better resources and infrastructure to tackle covid-19 than we have in India. The complete lockdown is in our national interest and it would help in containing the spread of the virus significantly. Paying heed to the request of the Prime Minister and following the shutdown would help you and therefore the nation.
Coming to the markets, we have seen complete mayhem so far in the last five weeks. The time to do some repair, some rebuilding and some shopping has probably come. Look at some damage control to the portfolio by topping up blue chips. The path to recovery will be slow, tedious and bumpy.
With a reasonable amount of comfort, it could be said that barring a major setback on the covid-19 front, things should limp back toward partial normalcy.
Use any sharp dips to buy into the market and for sure you will get opportunities.
