The week gone by saw markets begin the week with a loud thud and falling sharply. BSESENSEX lost 2,002 points while NIFTY lost 566 points on that single Monday and that was pretty much the story of the week with markets remaining just about there. The difference was the intraday volatility which increased significantly. An example of the same was the intraday difference on Tuesday which saw BSESENSEX make a high of 32,264 points and a low of 31,403. The intraday swing was 861 points and the closing difference at 31,453 points was 262 points. This was witnessed virtually on all the trading days and is a marked difference from what one saw in April.

BSESENSEX lost 2,074.94 points or 6.15% to close at 31,642.70 points while NIFTY lost 608.40 points or 6.17% to close at 9,251.50 points. The broader indices saw BSE100, BSE200 and BSE500 lose 5.97%, 5.86% and 5.75% respectively while BSEMIDCAP lost 4.91% and BSESMALLCAP 4.17%. There were no sectoral gainers and the one to fall the least was BSEHEALTHCARE down 0.40%.

The Indian Rupee lost 43 paisa or 0.57% to close at Rs 75.54 to the US Dollar. Dow Jones rose 607.63 points or 2.56% to close at 24,331.32 points.

Reliance was the star performer at the bourses last week and gained Rs 95 or 6.48% to close at Rs 1,562. During the course of the week it also announced two stake sales in Jio Platform to Silver Lake of 1.15% and To Vista of 2.32%. These stake sales would raise Rs 5,655 crs and Rs 11,367 crs respectively. This has been done at a valuation of Jio Platform of Rs 4.9 lac crs and is at a 12.5% premium to the stake sale to Facebook. Further the company has fixed the record date for rights entitlement as Thursday the 14th of May. There would be an electronic credit of the right in the demat account in which shares are currently held.

Markets have become choppy on expected lines and going forward the same would be the order of the day as the commentary from companies declaring results about the immediate future becomes known. Labour laws have been changed in three to four states for the next 1000 days and more states would follow with similar guidelines. Migrant labour is returning to their home states and this would cause an issue for reopening of industries with labour being unavailable.

It’s a good time to look at going forward what industries would be affected as a result of covid-19. There is no doubt that every single industry and sector would be affected in the short and medium term. The extent would differ from sector to sector. However, some sectors would undergo a see change post covid-19 recovering. Let us look at some of the sectors that would be badly hit. Top of the list would be Travel and tourism, hospitality, entertainment and lifestyle sector. Expanding this would include airlines, hotels, restaurants, malls and shopping centres and multiplexes. Sporting events and live programs would take a backseat. Yet another sector which would be hit is the commercial real estate space as many corporates which were the users of this facility are having a relook at working from home as a longer-term viable option. The biggest gainer without doubt is the healthcare sector which includes pharmaceutical manufacturers and healthcare providers like hospitals and clinics. Indian companies in the chemical space too would benefit as the world looks to outsource intermediaries and bulk drugs from Indian manufacturers rather than China. In the longer term FMCG companies too would have an advantage as consumers look to buy quality rather than price.

In the next few quarters, the world would be reinvented and many sectors would have to change from the way business was being done and the way it would be done going forward. An example of what I am talking would be the simultaneous release of a new Hollywood/Bollywood film on the internet where you pay for seeing it on the net and completely avoid going to the theatre. A sporting event happening without spectators is already happening and the idea is to keep the sport alive. Box office and gate collections will remain a thing of the past for quite some time.

Credit card companies have cut the limits of card holders based on their past history and usage to minimise losses on account of defaults later on in times of the pandemic currently on. The logic is that in these hard times people may use the limits to effectively borrow and then create issues on payment. Results from the only pure play listed card company SBI Card, show thatthe revenues for the 4th quarter ended March 2020 grew to Rs 2,433 crsagainst Rs 1,983 crs in the previous year. It also made late fee reversals related to covid-19 during the year of Rs 90 crsand also made provisions of Rs 489 crs for covid-19 impact. The net profit for the quarter stood at Rs 83.5 crs against Rs 248 crs in the year ago period.

On the covid-19 front the number of patients globally has gone up to 41.80 lac cases, with 2.83 lac deaths and 14.93 lac cases recovering. In India the number of patients affected has gone up to 67,161 cases with 2,212 deaths and 20,968 patients recovering. Since last week the number of patients increasing globally is 6.14 lac, while those recovering has gone up to 3.39 lacs. Number of deaths in the week is roughly 35,000. In India in the same period the number of cases has increased by 24,500 while patients recovered is 8,200 and deaths are 800. What is a cause for concern is the number of new cases being added with just about 4000 cases coming in the last 24 hours.

Coming to the markets in the week ahead, volatility would be the order of the day. There is uncertainty about the lockdown being lifted totally and the plans to restore the economy to near normalcy seem a long way off. How to balance the delicate equation of life and work and medium-term sustenance is the challenge. In such circumstances the strategy in the market would be to sell on rallies and buy only on sharp dips.

The week gone by was one of the best we have had in a really long time. With four trading sessions, markets gained on all the four days and kept their best for the last day which also happened to be the expiry day for April futures. BSESENSEX gained 2,390.40 points or 7.63% to close at 33,717.62 points while NIFTY gained 705.50 points or 7.71% to close at 9,859.90 points. The broader indices saw BSE100, BSE200 and BSE500 gain 7.37%, 7.20% and 6.94% respectively indicating that there was breadth in the rally. BSEMIDCAP gained 4.79% while BSESMALLCAP was up 4.40%.

The Indian rupee had a strong showing as well and gained Rs 1.34 or 1.75% to close at Rs 75.11 to the US Dollar. Dow Jones was under pressure on Friday and lost 51.58 points or 0.22% for the week to close at 23,723.69 points.

April futures expired on an extremely positive note and bulls drove home their advantage with the last week seeing half the gains made in the month. The series expired with gains of 1,218.45 points or 14.10%.

Reliance industries declared its results for the fourth quarter ending March 2020 and annual results for FY2019-20 which were below expectations. The performance of the core petrochemical business was under pressure and the saving grace was the better than expected performance from the telecom business where the “JIO” platform excelled. The company declared results post the market close and the impact of the poor performance was reflected with a sharp fall in the prices of the ADR’s of the company.

Reliance has announced the largest ever rights issue which would raise Rs 53,125 crs at a price of Rs 1,257 in a ratio of 15 shares for every 100 shares held. The share price closed at Rs 1,467 on Friday which means a discount of Rs 210 to the closing price. This incidentally will be Reliance’s first equity fund raising in almost three decades.

Let us look at the stock performance of Reliance in the last two months. The price of Reliance was Rs 1,329 at the end of February 2020 with a low of Rs 1,325 in that month. In March the month end price was Rs 1,112 with the low at Rs 876. Similarly, in April the month end price was Rs 1,467 with the low of Rs 1045. What has changed, the deal with Facebook and the talk with other platforms who may invest in the company. The due diligence with Saudi Aramco was already on prior to February end.

Reliance expects to complete the fundraising in the first quarter of the current year which means in less than 57 days. What does it mean for a retail investor of Reliance? It means a small investor who owns 100 shares of Reliance would have to invest Rs 18,855 for the 15 shares that he is entitled to and the ex-rights adjusted price would reduce to Rs 1439.60. This assumes that the share price remains unchanged at Rs 1,467. There is a possibility that the small investor may sell the present holding partially and then apply for rights. What does it mean for Mukesh Ambani? He has to fork out half the amount of the rights issue of Rs 53,125 crs (his shareholding is roughly 50%) and a commitment to fulfil the shortfall if any of the balance at Rs 1,257. Effectively the Reliance promoter has a commitment to buy at a price of Rs 1,257. If this happens that if the share price falls to around these levels, the public subscription would reduce. Interesting times ahead for Reliance without doubt in the days ahead.

Coming to the markets, we need to compare the two months gone by, March and April. While March was a disaster with BSESENSEX losing on a monthly basis 8,828.80 points, it gained just about half of that in April at 4,249.13 points. In the case of NIFTY, the loss was 2,604 points in March while the gain was 1,262.15 points. While March was the beginning of the pandemic with no roadmap, no idea of what the enemy is or looked like, there was pandemonium in the markets and they moved like a roller coaster with wild gyrations. In April, things were more measured, there was social distancing in some countries, global travel had ceased to happen and many more controlled measures taken.

Having seen the past two months what does the upcoming May have in store for us is the moot question? I strongly believe that markets are not yet out of the woods. While the results that are being declared are of a period where 75 days out of 90 were normal, there would not be too many surprises. The coming month would be one where the previous month has been a washout and the current month likely to see some industrial activity restarting. The pangs of restarting will ensure that it takes a couple of months at bare minimum for things to return to near normalcy while costs for the quarter would hardly see any major reduction. In such a scenario one should brace oneself for a month of weakness. How much, is a little difficult to say at this moment and it would be more appropriate as the month progresses. There is an old adage in the markets, “Sell in May”. Looks likely this time around.

Having said that it does not mean that markets would fall from 9.15 am on Monday. There is all likelihood of a relief or incentive package which would be announced in the coming week. The correction would be sometime post the announcement of the package.

On the Covid-19 front the number of patients globally has increased to 35.66 lacs with 2.48 lac deaths and 11.54 lac patients recovering. The positive part of the same numbers is the fact that while patients have increased by 5.72 lacs, those recovered has increased by 2.73 lacs. This effectively means that of 2 new cases, one has recovered. In India, the number of cases has moved up to 42,533 with 1,391 deaths and 11,775 patients recovering. Hereto there is heartening news in the fact that while new patients have gone up by 14,700, there has been recovery of 5.200 patients. Currently over a fourth of the patients have recovered.

STOP PRESS

RELIANCE has announced the sale of shares in Jio Platform to Silver Lake for Rs 5,655.75 crs. This values Jio Platform at 4.90 lac crs and an enterprise value of Rs 5.15 lac crs. Further this is a t a premium of 12.5% tot eh stake sold to Facebook and announced last month. This clearly means that the concern of Reliance debt reduction is on top priority.

In conclusion markets would be much more volatile in the coming week and month than the stable April that we have had. Use rallies to sell and only buy if there are sharp dips. The rains are some time away and one therefore needs to save only for the rainy day.