Markets fell on all five trading days last week and were volatile on expected lines. BSESENSEX lost 737.53 points or 2.02% to close at 35,808.95 points. NIFTY was down 219.20 points or 2.00% at 10,724.40 points. The broader market lost a little more with BSE100, BSE200 and BSE500 down 2.33%, 2.26% and 2.30% down respectively. The bigger pain continues to be in the mid and small cap which were down 2.71% and 2.96%.
BSEMIDCAP is less than 3% away from making a new 52 week low while BSESMALLCAP is at a 52-week low. The problem with these small shares is that there seems to be no level at which they would stop. They seem to be just falling non-stop and there are no levels for support for these stocks. In sharp contrast, the BSESENSEX is about 8% higher than its 52-week low.
Dow Jones had a positive week and gained 776.92 points or 3.09% to close at 25,883.25 points. The Indian Rupee gained 8 paisa or 0.11% to close at Rs 71.22.
Results season is over and there have been some positive takeaways from them. Many of the companies have posted positive results and the leaders are back in focus. Clearly the auto sector and the ancillary makers have been under pressure with the largest auto maker Maruti seeing a slowdown. The impact of this is likely to remain for a couple of quarters. Even this week the auto majors barring Tata Motors were down sharply.
The terror attack on the CRPF by a suicide bomber who blew up his vehicle against an oncoming convoy was indeed most unfortunate and has raised spontaneous protests from the common man against such attacks. The world unitedly has condemned the attack and asked Pakistan to take immediate action. It has added to the political tension with elections due in about two months.
The window of new announcements and projects to be launched in the run-up to the election being notified is about three weeks away. Expect a slew of them as we get ready for the other of all election which will be a watershed one. Many parties would be fighting this election for their survival and a poor showing this time around could be disastrous for their future. This situation would make this election dirty and rhetoric would be at an all time high. Expect drama and unexpected developments to take place which would be more eventful than some of the soap operas for their twists.
The knack with which market finds its weekly bogey stocks simply continues. This week it was the turn of Apollo Hospital and Emami which has a large portion of promoter shares being pledged. Emami lost Rs 24.90 during the week or 6.90% after losing Rs 27.25 in the previous week to close at Rs 360.85. Apollo Hospital lost Rs 118 or 10.34% to close at Rs 1,141. With promoter pledge becoming such a big concern, one is finding that shares seem to just tumble.
The broader issue is that a large portion of this financing has been done by mutual funds and some of it by NBFC’s. The golden run of mutual funds which saw huge inflows through SIP post demonetisation seems to have run its course and come to a complete halt. Live SIP accounts have fallen to 1.87 lakh accounts in December 2018 from 4.81 lakh accounts in April 2018. With the current state of the market being what it is, this situation is likely to worsen as returns are negative from the stock market.
Markets in the week ahead would continue to be under pressure and would look to find their level of support and make a base. They would continue to be volatile in this process. New revelations of promoter pledge would keep trigger happy market traders in a gleeful mood. Simple strategy would be to look to develop a portfolio from the current valuations which are compelling in many cases. Be choosy and greedy in stock selection and timing. Final advice, don’t buy everything at one time.
