Markets were hit badly by the FPI selling in Indian markets and they moving in the short term to investing in China. The fall which was witnessed for the 5th consecutive day shook markets quite severely. We lost on all four trading sessions of the week and this fall began with the onset of October series. BSESENSEX lost 3,883.40 points or 4.54% to close at 81,688.45 points while NIFTY lost 1,164.35 points or 4.45% to close at 25,014.60 points. The broader markets saw BSE100, BSE200 and BSE500 lose 4.32%, 4.21% and 3.94% respectively. BSEMIDCAP lost 3.20% while BSESMALLCAP was down 2.01%.
The Indian Rupee was under some pressure with escalation in the Israel-Iran war. Crude has been rising and one wonders what could lead to the end of this war. The first anniversary will fall on the 7th of October, two days away and one can only hope that things don’t get any nastier. The Rupee lost 26 paisa or 0.31% to close at Rs 83.97 to the US dollar. Dow Jones gained on three of the five sessions and lost on two. It closed virtually flat having recovered the losses with a sharp rally on Friday. Dow closed with a flattish weekly gain of 39.75 points or 0.09% to close at 42,352.75 points.
The primary markets are getting ready for the large issue from Hyundai and Afcons to hit the market in what could be termed as Dusshera-Diwali dhamaka. The roadshow for Hyundai is likely to be held later during the week with the issue opening and closing in the following week. Last week one saw the listing of Diffusion Engineers Limited on Friday.
There is an issue from Garuda Construction and Engineering Limited which would open on Wednesday the 8th of October and close on Friday the 10th of October. The issue consists of a fresh issue of 1.83 crore shares and an offer for sale of 95 lakh shares. The price band is Rs 92-95. It is a little surprising that with a 5% price band being mandatory by SEBI, how this issue just has a three-rupee difference between the lower price and the cap price. Strange are the ways that some companies and their merchant banker works.
During the four-day week, FPIs sold cumulatively over Rs 40,000 crores in the cash market. This was in the new October series. There sales in the futures segment was separate and larger, but difficult to understand as options also happen. There selling was matched almost 80% with domestic institutions chipping in with net cash purchases of Rs 32,000 crores.
What does the week ahead hold in store for us is the key question on everyone’s mind. While the fall has been huge and shaken all those optimists who believed that every dip in the market is a buying opportunity, the fall does throw up interesting opportunities as well. This fall has shown the vulnerability and at the same time, the correction has removed some froth in the valuations. The result season is upon us and if corporate India obliges with better results, everything would be taken in the market’s stride. A note of caution is the fact that over the last nine quarter’s results have not lived upto expectations and the last one saw the slowest growth. The expected improvement is a tall order and performance needs to be of top class for expectations to be met.
In yet another measure to control SME, the exchanges have introduced ASM measures on the segment with effect from Tuesday. This effectively means that price movement on SME stocks where doubling and then trebling was the norm would not happen with the same amount of certainty. They would be subject to the same mechanism as prevalent or applicable on the main board. On a stock coming under the ASM net, they would be subject to trade-to-trade restrictions with circuit filters of 2% and 5%. Its time to relook at your SME portfolio and at least separate the wheat from the chaff.
Coming to the week ahead, expect markets to be under pressure in the early part of the week. The fall has been big and has shaken many. While we need a recovery, for it to be meaningful it also needs to be reassuring. This means that a lot of time (couple of days) would be spent in first the initial reversal from negative to positive and then actually the rise, regaining the fall we witnessed of over 4,000 points on BSESENSEX and 1,200 points on NIFTY.
The strategy would be to play with the ear to the ground and look at international cues from Israel-Iran and how China and its markets behave post the holiday season. They have already gained over 21-22% over the last few days. It would make sense to look at large cap stocks in the initial phase as maximum and fastest recovery would happen there first before spreading. Further, the small cap has not actually participated in the fall as yet. While cherry picking may be done, we are still sometime away from where one can go full steam into buying the markets.
Trade cautiously.
