Markets continued to remain volatile in the week gone by and lost on two of the five trading days, remained flattish on one and gained on the remaining two. The net outcome saw BSESENSEX gain 200.15 points or 0.51% to close at 39,394.64 points while NIFTY was up 64.75 points or 0.55% at 11,788.85 points. The pivot of 11,700 held NIFTY in good stead and it went below this level only on Monday. The broader indices saw BSE100, BSE200 and BSE500 gain 0.68%, 0.76% and 0.79% respectively. BSEMIDCAP was up 1.26% while BSESMALLCAP gained 1.10%.
June futures expired at 11,841.55 points, a series loss of 104.35 points or 0.87%. This was a choppy and volatile series which saw a low of 11,625 points and a high of 12,103 points. The key support level of 11,700 held NIFTY through the month and even though there were occasions when the level was breached, markets bounced back each time.
The rupee made decent gains and was up 53 paisa or 0.76% to close at Rs 69.02 to the US dollar. Dow Jones lost 119.17 points or 0.45% to close at 26,599.96 points.
In primary market news the offer for sale from Indiamart Intermesh Limited was subscribed 36.21 times with QIB portion subscribed 30.83 times, HNI portion subscribed 62.13 times and Retail portion subscribed 14.07 times. There was a total of 4.21 lac applications. The other issue from KPR Agrochem Limited which was to open on Friday the 28th of June was withdrawn a day before it was to open. No reasons for the same were given. If one were to hazard a guess, the only one forthcoming could be the potential anchor investors developing cold feet.
With effect from 1st July, applications in primary issues will undergo a sea change with the blocking of amount through “ASBA” being linked via UPI. This effectively means that an applicant would have to have a debit card as that alone is linked through UPI. Having a credit card will not help as the same is not linked to a bank account and there is no balance available for blocking against. The old system of physically taking the application in person to the bank for the blocking will be done away with. This introduction will affect applications in the immediate short term as investors get used to the new system. In the longer term it would require a new mindset to possess a debit card as a large number of investors are wary of having one.
SEBI at its board meeting has made a number of changes which would affect the markets, mutual funds and promoters. On the issue of pledge and encumbrance, they have said that any promoter who has 20% of the share capital of the company or 50% of his ownership pledged or encumbered, would have to disclose the same and also mention the reason for the pledge. The definition of pledge and encumbered has been widened. It has laid down norms for mutual funds where they have been restrained from entering into ‘standstill pacts’ with promoters for loans against shares. SEBI says that they are mutual funds who invest and not banks who lend. This difference says a lot and clearly defines the mandate of mutual funds. They have spelt out in greater detail conditions for issue of DVR shares or shares with differential voting rights.
In Osaka Japan, the G20 meeting saw significant progress on the trade war between US and China with both nations agreeing to sit down and resume talks. In the meanwhile, there would be no further change in tariffs or duties for the time being. This itself is big news for the markets which would not only heave a sigh of relief but react positively when they open for trading on Monday morning. Even though no deadline has been set, this is some positive news on the trade war front after a very long time. Prime Minister Modi too had a fruitful visit and India have entered into a number of pacts at the summit.
The budget would be presented on Friday the 5th of July and there are no expectations on which the market has run up. On the contrary there could have been some downside with expectation of new estate duty and inheritance tax which may be imposed. The budget rally would now take off on the back of improved global sentiment on G20 outcome.
Our markets are likely to open with an upward gap and trade higher. The state of the economy followed by the budget would determine the direction as the week progresses. The good news is that the monsoon has advanced significantly and it has by and large made up the deficit that the delayed onset had in June. The monsoon advancing and a near normal monsoon being predicted will cheer the market even though it did not do so on Friday. The penchant for shorting every rally continues and this would be yet another trigger for the current rally. Trade cautiously in a volatile budget week ahead.
