Markets have made a new low for the calendar year 2013 on Thursday the 22nd of August. The new lows were 17,759 on the SENSEX and 5,249 on the NIFTY. The previous lows were in April 2013 and the values were 18,144 and 5,477 respectively. Whenever the markets bounce from new lows the resultant rally is swift and fierce. This time was no different and the SENSEX closed at 18,510 and 5,471 recovering close to 750 points on the SENSEX and 212 points on the NIFTY. The Indian Rupee after touching a low of 65.56 recovered to close at Rs 63.20, a net loss of 2.5% for the week.
The rally seems to have completed the recovery part and would now once again depend on the course the rupee takes. Thursday sees the expiry of August futures which are down close to 8% from the opening levels. There may be an attempt to narrow the difference but significant movement or improvement should be ruled out for the time being.
NSEL seems to be fast running out of time. The exchange seems to be a big fraud and one wonders where the Rs 5,600 crs have disappeared. The previous week saw 50% of the scheduled 30 week payment being received, while the second week sees a mere 5% being received. I believe the Finance Ministry and the other relevant ministries involved must take over the administration of this exchange after superseding the present board of directors and appoint their administrator. There is a serious danger of the trail of money and stocks being covered up in the present scenario by the concerned persons. A sum as large as that involved shakes the confidence of investors and affects the image of the country in the long run.
Commodity exchanges seem to having a rough journey and even NCDEX seems to be involved in a case where 3,000 tons of black pepper have been seized by the Food and Drug administration because the same is not fit for human consumption. Questions are being raised about the role of the exchange in ensuring the conditions of the contract which stipulate the quantity and quality of the commodity. Such issues not being tackled on a war footing before they go out of hand could affect commodity trading and hence exchanges.
Sterlite Industries would be merged into Sesa Goa and the swap ratio is for every 5 shares of Sterlite Industries, shareholders would get three shares of Sesa Goa. Sterlite Industries is part of the SENSEX and NIFTY and would get replaced by Sesa Goa with effect from Friday the 30th of August. This replacement could see some sharp movements in both the stocks in the coming week.
One is getting a sense that the government may increase prices of diesel sharply and virtually deregulate the prices. This if at all happens would be done after parliament adjourns post the current monsoon session. The government is realising that subsidies on account of fuel and the proposed food security bill will cause the current account deficit to veer out of control. Assuming that the prices of diesel are raised by even three or four rupees, the oil marketing company’s shares like IOC, HPCL and BPCL will see a strong rally. Oil producers like ONGC, OIL and GAIL will also benefit simply because their share of subsidy will come down dramatically. Buying calls in these companies for September series which are out of the money could make a satisfactory risk reward trade.
Markets will be driven by movement of the rupee, happenings in Parliament and decisions emanating from the FED on Quantitative Easing.
Trade cautiously in super volatile markets.