It was a week full of action at the markets and elsewhere as well. Markets opened the week with a bang and were up for the first three days, with profit taking over the remaining days. BSESENSEX gained 314.74 points or 0.88% to close at 36,009.84 points. NIFTY gained 67.60 points or 0.63% to close at 10,794.95 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 0.58%, 0.63% and 0.47% respectively. BSEMIDCAP gained 0.19% and BSESMALLCAP gained 0.05%.
The Indian Rupee lost 77 paisa or 1.10% to close at Rs 70.49. Dow Jones gained 562.79 points or 2.40% to close at 23,995.95 points.
The US government continues to remain shut over the budget issues with the Democrats unwilling to toe the line of Donald Trump. Trumps insistence that he be allowed to spend money to build the wall with Mexico is the major bone of contention. One wonders whether Trump is right in what he says when the longest surviving wall was brought down with the unification of West and East Germany way back in 1989. The wall between East and West berlin was 96 kms long but just 27kms of that separated East and West Berlin. In the 21st century having another wall being made between US and Mexico, sounds preposterous and the cost is estimated to be 30 billion dollars. Incidentally this wall would be of 1,933 miles, the length of the border of the two countries. God knows what the outcome of the present stalemate would be with no side willing to give way.
Bandhan Bank announced the merger of Gruh Finance with itself to meet the dilution norms required as per RBI directive. The ratio of the merger is 568 shares of Gruh Finance for 1000 shares of Bandhan Bank. Shares of both companies have fallen since the announcement which happened on Monday the 7th of January. Bandhan Bank shares were trading at Rs 528.65 on Friday the 4th of January and at Rs 501.10 on Monday before the announcement came post market closing. The share price fell further to Rs 450 during the week before closing at Rs 454.15, a loss of Rs 74.50 or 14.09%. Shares of Gruh Finance fell more from Rs 318.50 to Rs 241.65. The low was Rs 228.40. The loss was Rs 76.85 or 24.13%.
Investors wanting to be shareholders of the merged entity have an arbitrage opportunity where they can buy shares of Gruh Finance and get Bandhan Bank post-merger at a price of Rs 425 against the market price of Rs 454.15, because of the ratio currently. This happens if one were to buy 5.68 shares of Gruh Finance he would get 10 shares of Bandhan Bank post-merger. If this difference is not minimised, shares of Bandhan Bank would be under pressure.
The cabinet proposed and introduced the reservation bill in both houses of Parliament and the same was passed in record time. The bill allows a reservation of 10% quota for the poorer section irrespective of caste or religion in educational institutions and government jobs. This would help the upper caste and should translate into votes for the ruling BJP from the upper caste voters who felt nothing was done for them. With the passing of this bill in record time, the stage has been set for the general elections of April-May 2019. This was a bill which no political party could oppose even though the opposition which had an upper hand was trying to stall it.
Results were declared by the two IT giants, TCS and Infosys on Thursday and Friday respectively. There are positive signs from these results and augur well for the IT sector. Infosys has had issues with the recent acquisitions and these have put the company on a back foot, but the other businesses have done well, and the company upped its guidance. Further Infosys has announced a buyback of shares at Rs 800 totalling Rs 8,260 crs. The price of Rs 800 is at a premium to the closing price of Rs 684 by Rs 116 or 16.95%. This is part of the plan to return money to shareholders.
More people continue to remain bearish on markets and believe that every rally is an opportunity to short the market. While their belief cannot be challenged the fact remains that markets are in a state of flux not only in India but globally. US has its problems with Trump, the wall with Mexico and trade war with China, while UK and Europe are struggling with BREXIT. There are concerns about the elections in India, but they are still four months away and there are too many moving parts to the same. Markets would continue to move up if bearish sentiment remains. The pace of rise could vary from time to time. Use rallies to exit long positions and falls to add to positions.
