Friday and markets seem to have a strange connection. The Finance Minister loves to have her press conferences post market at either 4 pm or 6 pm on Friday. This time however the day remained the same but the time was changed to morning. The impact was there for all to see particularly with the PM Modi spending his next seven days in the US. The markets gained a whopping 1,921 points on the BSESENSEX and 570 points on NIFTY.

The weekly change was 629.93 points on BSESENSEX or 1.68% to close at 38,014.92 points. NIFTY gained 198.30 points or 1.79% to close at 11,274.20 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.05%, 2.12% and 2.03% respectively. BSEMIDCAP was up 3.33% while BSESMALLCAP gained 1.47%. It was a day when a stock like Maruti saw an intraday move of Rs 1060 and closed with gains of Rs 648 for the day and Rs 135 for the week.

The Indian Rupee was volatile and finally closed virtually unchanged, losing 2 paisa or 0.03% to close at Rs 70.94. Dow Jones lost 284.45 points or 1.05% to close at 26,935.07 points.

Press conferences by the Finance Minister have been held typically post market at 4pm or 4.30 pm on Friday’s. This was the first time that it was held in the morning. It certainly should have rung a bell in the mind of the canny investor or trader. Secondly it was on the eve of the departure of the PM on his week-long trip to the United States which includes the event Howdy Modi, and the UNGA (United Nations General Assembly) meeting. This did not ring a bell in the minds of market participants and bears were caught with their pants down. The FM announced a cut in corporate tax to 22% plus surcharge for those who did not take exemptions. This would make the peak rate at 25.17%. It also reduced MAT (minimum alternate tax) to 15%. The FM also introduced a new tax rate of 15% plus surcharge becoming effectively 17.01% for new companies incorporated after 1st October 2019 and commencing production before 31st March 2023. Very clearly this section is to induce American companies looking to find alternative place to relocate after Donald Trump has asked them to shut down China operations. At this tax rate India becomes competitive with its other South East Asian competitors. Earlier the government had allowed 100% FDI in contract manufacturing.

It is widely expected that GSP (generalised system of preferences) which was enjoyed by India and recently discontinued would be restored. This would help India enjoy preferential treatment in its foreign trade. Further some sort of agreements on energy security and American companies coming to India to set up manufacturing bases are expected. This would boost the make in India program and help in kick starting the Indian economy.

The GST council has also made changes in GST applicable to hotel rooms where if the room tariff is upto Rs 1000, there would be no GST. In the bracket of Rs 1,000 to Rs 7,500 it would be 12% and at 18% for rooms above Rs 7,500. This would act as a boost for the tourism industry. Further the GST on aerated drinks has been increased from 18% to 28% plus 12% additional cess.

The Friday factor and the impact it had on the markets can be gauged from the table given below.

From the above we can see that the markets have a close connection with Friday and so does the FM. Last Friday was special as it coincided with the visit to USA of the Prime Minister. The tax cut is even more significant than any of the announcements made in Modi 2.0. One can also conjecture that individual tax changes are now around the corner.

Last night the Howdy Modi show was a grand success. The statement made by PM Modi about terrorism and also endorsed by Donald Trump is testimony of the closeness and significance of this visit. The PM also mentioned about the deal making abilities of Trump which signifies more such deal announcement over the next 4-6 days.

Petronet LNG has entered into a non-binding agreement with Tellurian to buy 5 million tons per annum of LNG concurrent with equity investment. Expect more deals to be announced on this trip of the PM.

Elections have been announced for the states of Maharashtra and Haryana to be held on Monday the 21st of October. The counting and declaration of results would take place on Thursday the 24th of October.

For those who are technically inclined, the low on 20th September was quite similar to the one on 23rd August with the tow levels being 36,102.35 points (23/o8) and 36,085.74 (20/09). Similarly, on NSE it was 10,637.15 points (23/08) and 10,691.00 points (20/09). With such strong support and momentum, it can now be said that an immediate term bottom has been made.

The week ahead has September futures expiring on Thursday the 26th of September. The present level of NIFTY at 11,274.20 points, is higher by 325.90 points or 2.98%. Momentum is now with the bulls and PM Modi having an action-packed week in the US, one can be sure that there will be plenty for the markets on a daily basis.

With so much at stake, all focus and action would happen in the United States of America. After the Howdy Modi and the UNGA address by Modi, focus would be on what large infrastructure projects could India get. The change in tax rates would broadly see corporate India’s performance improve by between 8-12% as far as earnings go. While Friday saw a huge jump in indices, the negative bias in the markets still seems to continue. Expect short covering in the week ahead and a successful and profitable expiry for bulls. The breadth of the market is expected to increase significantly with midcap and small cap shares participating. Enjoy the rally, it sure has taken a very long time coming.

The week began with markets trading positive. They gained for the first two days, then lost on Thursday and gained again on Friday. The week ended with the BSESENSEX gaining 403.22 points or 1.09% to close at 37,384.99 points. NIFTY gained 129.70 points or 1.118% to close at 11,075.90 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.35%, 1.38% and 1.52% respectively. BSEMIDCAP gained 2.25% while BSESMALLCAP performed even better and gained 3.32%.

The Indian Rupee gained 80 paisa or 1.12% to close at Rs 70.92 to the US Dollar. Dow Jones on the back of improvement in sentiment on the US China front gained 422.06 points or 1.58% to close at 27,219.52 points.

BPCL was a star performer on the back of expectations that the government may divest its entire majority holding of 53.29% to a strategic partner. This would help the government garner about Rs 47,000 crs at current valuations and help achieve a major part of the 1.05 lakh cr target from divestment in 2019-2020. Shares of BPCL gained Rs 29.85 or 7.87% to close at Rs 408.90. Sister companies HPCL gained 3.495 while IOC was up 2.52%. Further the government ownership in IOC and HPCL would see the control more than 50% of the hydro fuel business. PM Modi’s strong personal relationship with Russian Premier Putin would make Russia a frontrunner in the divestment. Secondly after the acquisition of Essar Oil this would become an extension for them with the retail presence as well. There are more than half a dozen interested bidders including Shell, the erstwhile owner of BPCL before it was nationalised.

The FM held a press conference this time on Saturday, and announced measures to help the beleaguered real estate sector and boost exports. A fund of Rs 60,000 crs has been set aside to assist and provide credit to under construction homes/projects which are not NPA’S nor have gone into insolvency proceedings. A precondition is that 60% of the work be completed in such projects. While one can always complain that more needs to be done or can be done, it is important to appreciate that it is being done.

Strange things are happening in Corporate India. Ousted Chairman of C G Power, Gautam Thapar wants a video recording of the proceeds of the board meeting which ousted him. Similarly, a board meeting held by Manpasand Beverages was not intimated to the exchanges. Naturally the outcome would also not be communicated. The independent Director on the board informed the exchange of the outcome. Subsequently there were disputes about the outcome posted by the independent director raised by the Chairman of the company. I believe it is time for the exchange to step in and haul the company on corporate governance issues. The last word on this is yet to be written.

Markets have an upward bias in the week ahead. Support levels which previously existed at the lows of 23rd August at 36,102.35 points on BSESENSEX and 10,637.15 points on NIFTY have moved to the subsequent higher bottom of 4th September at 36,409.54 points and 10,746.35 points respectively. While the breadth of the market has improved and also borne out by the movement in midcap and small cap stocks, quite a few people believe that the market is ripe to short on every rally. One must remember that FPI’s selling has abated and they have subscribed to the OFS by Apollo Hospitals and the private insurance companies in the last couple of weeks. There is appetite for Indian stocks.

Saudi Aramco’s refinery in Abqaiq was attacked by a group of drones and would remain affected for some time. This attack highlights the vulnerability of plants worldwide and the kind of threat they are now posed by drones. This could lead to a rise in crude oil prices which would be a dampener for India.

The week ahead would trade with a positive bias and selective long positions may be taken. One needs to remember that every rise will be met with scepticism and there would be alternate bouts of buying and selling. This would not be a one way rise in any case. Use dips to add position and wait for the July-September results due in less than 4 weeks from now. Further there could be more announcements from the Finance Minister as well.