Markets continued to remain in a state of flux with neither bulls nor bears able to dominate the week. Markets gained on three of the four trading sessions and lost on one of them. The net change during the week could at best be termed as neutral. BSESENSEX gained 33.08 points or 0.08% to close at 40,356.69 points while NIFTY lost 12.70 points or 0.11% to close at 11,895.45 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.24%, 0.16% and 0.23% respectively.
FPI’s have continued showing interest in Indian equities and while there have been days when they have been net sellers, the number of days that they are net buyers, outnumbers those that they are net sellers.
Dow Jones gained 240.34 points or 0.87% to close at 27,921.58 points, and it continues to make new highs. The Indian rupee lost 49 paisa or 0.69% to close at Rs 71.78 to the US dollar.
While it is easy to say that markets seem to be going nowhere, the fact that we are trading in almost new territory and holding there now for about a fortnight is itself good news. The 40k mark on the BSESENSEX and 11,850-11950 levels on NIFTY seem to be a trading range for the market. A movement on either side from these levels is overdue and markets would move sharply in the direction of the breakout or breakdown. I strongly believe that the movement would be a breakout leading to new highs on the NIFTY which is yet to happen. Parliament begins its Winter session and there would be a host of issues which come up for discussion. This adds to the volatility in the markets.
Telecom sector which a few years ago was the hottest sector is now down in the dumps. The recent Supreme Court verdict has added to their woes and the companies have reported huge losses in the quarter and half year ended September. Bharti Airtel on marginally better revenues of 41,870 crs against Rs 39,950 crs has reported a net loss of Rs 2,152 crs against a net loss of Rs 2139 crs in the previous half year. After providing for exceptional item this loss balloons to Rs 25,162 crs. This is a negative EPS of Rs 53.04 for the period. The exceptional item is provision under “AGR” which is adjusted gross revenue. The Supreme Court has given the telecom companies three months to pay the same.
Share prices of Bharti post the results went up sharply and gained Rs 31.55 for the day to close at Rs 393.20. They were up Rs 24.15 or 6.54% for the week.
On the other hand, Vodafone Idea reported a loss of Rs 55,806 crs or a negative EPS of Rs 21.89. Share prices of the company during the week fell from Rs 3.78 to Rs 3.68.
Reliance Communication even though has no active business now reported a loss of Rs 30,142 crs. All these losses by the three telecom companies are largely on account of provision for AGR, delayed interest and penalty.
What will happen to these telecom companies in the immediate future, is probably known only to Supreme Court or God. This is akin to SEBI Chief Mr Tyagi commenting on Infosys issue where the matter was known only to Nandan Nilekani or God.
Sterling and Wilson had tapped the markets in August-September 2019 thorough an offer for sale. There was a loan to the promoters of the company and there was an explicit and written agreement in the document that stated the loan would be repaid within 90 days. Come 90 days and of the loan amount of Rs 2,335 crs and interest of Rs 228 crs as on 20th August (date of listing) the promoters have repaid a mere 250 crs. The outstanding as of 30th September is Rs 2,085 crs and interest of Rs 256 crs. Markets never like something some like this and though the company had also declared decent results for the quarter ended September 2019, the share hit the lower circuit. The share closed at Rs 401.20, losing Rs 100.25 on just Friday. For the week, the share was down Rs 143.80 or 26.39%. Since listing shares which were issued at Rs 780, have almost halved and are down 48.56%. Recovery in prices in the immediate short term is looks difficult as the sellers are FPI’s and the call is on the commitment of promoters.
Results season is over and you will have a few company results trickling in, in the next week from the laggards but of hardly and consequence. As mentioned earlier it has been a tough quarter for India Inc which has been ‘camouflaged’ by tax cuts announced by the Finance Minister. Markets have certainly factored this is and now believe that things have bottomed out and recovery would happen here on no matter how slow.
FPI interest in Indian markets is certainly helping and aiding market recovery. The problematic auto sector seems to have bottomed out and almost all manufacturers are confident that things should be better when the cut-off date for BS -VI vehicles of 1st April 2020 is introduced. The feeling is that inventory levels would be substantially lower than what existed during BS -IV introduction.
Bulls and bears tussle seem evenly matched and there is enough news flow to keep markets moving in both directions. The mood on the street is one of expectation and there is a lurking fear that some positive news could trigger a sharp upward movement.
The trading range for the market is around 40k for the BSESENSEX and 11,850-11950 levels on NIFTY. These levels need to be decisively seem to be a trading range for the market. A movement on either side from these levels is overdue and markets would move sharply in the direction of the breakout or breakdown. I strongly, believe that the movement would be a breakout leading to new highs on the NIFTY which is yet to happen. Keep adequate stop losses and trade with a positive bias in the coming week.
