Markets continued to be volatile and were down during the first two days of trading. BSESENSEX had lost about 300 points in the first two days and then staged a smart recovery to end in positive territory. BSEMIDCAP had lost 300 points and there was buying by promoters in their shares looking at the attractive opportunity to enter their own stocks. BSEMIDCAP gained 500 points in the next three days. BSESMALLCAP lost 750 points in two days and managed to gain 650 points. What is important to note is that there was a sharp correction and then a rebound, but its not all over again.
The BSESENSEX gained 0.61% on a weekly basis while NIFTY gained 0.66%. BSEMIDCAP was up 1.06% but BSESMALLCAP was down 0.54%. The realignment of mutual fund schemes as mandated by SEBI was the main reason for the fall in the mid and small cap stocks. In general, there is lack of interest in the market and the fact that FII’s have been sellers for the last few months is weighing on the minds of investors.
RBI had its monetary policy review meet and hiked interest rates on expected lines. Repo rate was increased by 25 basis points to 6.25%. This hike is after four and a half years where rates have been kept unchanged. The last revision was in the January 2014 meeting. The hike was unanimous with all the members of the committee recommending the price hike. The street expects that this was the first of many more such hikes and in this financial year there could be another two to three hikes in the remaining part of the year.
Crude has moved up again after having fallen for some time now. While the rise in crude oil prices looks more to do with supply side issues, with OPEC trying to force its way, things could remain heated. In line with the rise in crude prices the value of the Indian Rupee fell and lost 44 paisa or 0.65% to close at Rs 67.50.
ICICI Bank board has not been able to complete its reply to SEBI and has sought more time. Very clearly the noose is tightening, and things are becoming uncomfortable for the players in the drama. In the case of Fortis, the company has received intent and would be receiving final bids from four suitors.
With realignment of mutual fund schemes partially done and more to follow, markets particularly mid and small cap would be volatile and therefore provide opportunities to buy on dips. Be patient and choosy over the next couple of weeks to use such occasions to buy.
