Markets have a mind of their own and they behave irrationally when they are exuberant. What
better example of this can there be other than what happened after the US Fed announced a rate
cut of 50 basis points on Wednesday US time. What did the markets do? They rallied strongly and
then closed in the negative after getting the cut of 50 basis points in the US. The next day they
rallied and Friday was yet another day. At the end of it all, the rate cut gave the ammunition to
markets globally and they were on fire when they closed for the week.
Our markets made new highs on an intraday basis and closed at new highs as well. BSESENSEX was
up 1,653.37 points or 1.99% to close at 84,544.31 points while NIFTY gained 434.45 points or 1.71%
to close at 25,790.95 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 1.52%,
1.29% and 1.06% respectively. BSEMIDCAP was down 0.16% while BSESMALLCAP was down 0.08%.
Not significant in value but the outperformance that the sector has been displaying, took a severe
beating. Would it reflect in a correction in the coming days and weeks, only time will tell, but one
should turn cautious.
The big turnaround rally witnessed on Friday was reflective of rebalancing in the weightages of FTSE
all world and FTSE all cap indices that went through semi-annual rebalancing. More than a billion US
Dollars have flowed in on this count on Friday itself and it reflects in the net FPI buying on Friday
which was Rs 14,064 crores. Domestic Institutions were sellers of Rs 4,427 crores.
The interest rate cut of 50 basis points in the US saw the band being fixed at 4.75-5.0%. The FED has
also said that there would be two more rate cuts of 25 basis points in the two meetings remaining
for the current calendar year. This saw a flip-flop in the US markets on Wednesday post the rate cut
being announced. Markets rallied initially and were up 381 points before profit taking saw markets
lose and close in the negative, down 103 points. They rallied strongly on Thursday and gained 478
points. At the end of the week, Dow gained 669.58 points or 1.62% to close at 42,063.36 points.
In primary markets news, we had four listings in the last week of which three listed on Monday. The
top of the charts was the stellar listing from Bajaj Housing Finance Limited. The company had issued
shares at Rs 70 and the discovered price was Rs 150, a gain of Rs 80 or 114.28%. It then gained
further and closed at upper circuit of Rs 165, a gain of Rs 95 or 135.71%. While Bajaj Housing had a
stellar debut, the shares of eight other Housing Finance companies lost between 7-9%. Defies logic
as to why it happened as Bajaj Housing is not a new player and it does not involve shift in market
share. The only impact would be that it is a listed player and that’s it. Secondly the peak market
capitalization of the company made on Wednesday at a price of Rs 188.45 per share was a
staggering Rs 1.56 lakh crores. This market cap was greater than the next eight companies from the
housing finance sector put together. Is this sustainable? Only time will tell. The share lost ground
and closed at Rs 163.74, a gain of Rs 93.74 or 133.91%. At this price, the market cap is now at Rs
136.36 lakh crores. Significantly, the share closed lower than the close of Monday at Rs 165.
Euphoria continues to drive the momentum in markets and the twin facts of FED rate cut and FTSE
rebalancing were the drivers for last week’s rally. With markets at lifetime highs on both an intraday
basis and closing basis, it’s time to take stock of what the upcoming July-September results could
have in store for all of us. The previous results for the April to June quarter, saw the slowest growth
in the last nine quarters and were disappointing. While being optimistic is fine, one should have a
pool of money available to take advantage of the situation when needed.
The week ahead sees September futures expire on Thursday the 26 th of September. The current
value of NIFTY at 25,790.95 points is higher by 639 points or 2.54% compared to the previous

month’s close of 25,151.95 points. In normal circumstances this would be a comfortable lead, but
considering that as much as 375 points or 58.68% came on just Friday, it could be much closer than
what the number indicates. One should take some money off the table and trade cautiously. Sector
rotation is on, no doubt. While in the previous week IT was the performer, this week they were the
laggards with Banking and Auto chipping in as the start performers. FMCG giant Hindustan Lever also
had a great showing.
In conclusion, trade cautiously as markets seem to be in the midst of irrational exuberance.