Markets continued their upward march through the week but a downgrade of the sovereign outlook by Moody’s caused a break in the momentum. This was further compounded by it being Friday and looming weekend and also the fact that four important judgments were to be pronounced by the Supreme court in the latter half of the coming week.
BSESENSEX gained 158.58 points or 0.39% to close at 40,323.61 points. The intra-week high was made on Friday at a level of 40,749.33 points. NIFTY gained 17.55 points or 0.15% to close at 11,908.15 points. The intra-week high was 12,034.15 points, making the all-time high roughly 80 points away. BSESENSEX is trading at an all-time high.
The broader indices saw BSE100, BSE200 and BSE500 lose 0.08%, 0.15% and 0.24% respectively. BSEMIDCAP was down 1.07% while BSESMALLCAP lost 0.93%. FPI’s have been bullish and have been buyers on 75-80% of the days and are investing about Rs 850-1000 crs on a daily basis.
Dow Jones has also made a new lifetime high and gained 333.88 points or 1.22% to close at 27,681.24 points.
The over 150 years old Ayodhya- Babri Masjid dispute judgement was announced on Saturday the 9th of November. The litigation began almost immediately after independence and becomes a seventy year plus dispute, there has been controversy much before that. The idea of choosing Saturday was that it is a half-holiday and would be easier to monitor law and order in case of any untoward incidents. Till the time of writing this article things have been under control across the country. The Supreme Court judgement was unanimous and it has asked the Central government to form a trust to construct the temple while also directing it to allot 5 acres of suitable land for making a mosque.
Three judgements, namely the Sabarimala case, Rafael case and RTI are to be announced between the 13th and 15th of November.
Moody’s has downgraded the sovereign outlook from stable to negative. This saw markets lose significant ground on Friday with BSESENSEX down 330 points and NIFTY 104 points. The Indian Rupee too lost significantly and was down 33 paisa for the day.
With Ayodhya behind us it would be fair that the markets would get back to their previous ways. The development of the region and construction of the temple itself would propel the economic wellbeing of the region. Going forward it would become a large temple town and have benefits associated with what Tirupati, Vaishnodevi or Shirdi and Nasik have. The expected new high on NIFTY last week may happen in the coming week or fortnight.
While Maharashtra had a clear mandate in the recent elections for the BJP-Shiv Sena combine, we are seeing drama in the state which could only be seen in Bollywood. BJP has refused the first offer of forming the government on being invited as it was the largest party. Shiv Sena has been invited to form the government and has time till today 7.30 pm. It needs the support of NCP and Congress to do so. The price that would have to be paid to get the Chief Minister’s post is anybody’s guess. Deputy Chief Minister to both parties, speaker to the partners and equal number of cabinet berths to go along. This is without the claim of the independents who have supported the Sena. Not sure whether this alliance if formed within the next 12 hours will last 5 years or we will see more drama. Having given the state update, this is not to suggest that this would have a bearing on the markets but could alter BJP’s policy and approach to alliances in the future.
The week ahead would be the last week for results reporting season and it is widely expected that overall the season has been decent with the tax break helping in a large way. If one were to exclude the gains on account of the tax changes, results are still positive to a large extent and give rise to expectations that by the time the fourth quarter results of 2019-2020 are announced the slowdown pangs would have been resolved.
In conclusion, with a major socio-political issue hanging fire for decades resolved, markets should settle down. Moody’s downgrade apart, India continues to be that ray of hope which could not only be the place for growth but probably the fastest growing economy with some base size. The breadth of the market increasing and newer stocks participating in the rally gives comfort and reason to believe that the momentum would continue. Use sharp dips to build positions and a new NIFTY is on the cards in the current month if not earlier.
