The week gone by began on a positive note and gained on the first three days. Then on Thursday on account of weekly expiry of NIFTY and Bank Nifty it surrendered the gains of the first three days to become flat for the week. Finally, we had a sell off on Friday where markets lost ground substantially when the Finance Ministry made it clear that there would be no change with regard to surcharge for FPI’s as well. The net result at the end of the week was that BSESENSEX lost 399.22 points or 1.03% to close at 38,337.01 points. NIFTY lost 133.25 points or 1.15% to close at 11,419.25 points. The broader market saw BSE100, BSE200 and BSE500 lose 1.31%, 1.43% and 1.57% respectively. BSEMIDCAP lost 3.27% while BSESMALLCAP lost 3.38%.

The top sectoral loser was BSEAUTO down 5.85% while the top gainer BSEIT was up 2.34%, The top gainer in stocks was Infosys up 8.12% while the top loser was Yes Bank down 11.58%. The Indian Rupee lost 12 paisa or 0.17% to close at Rs 68.80. Dow Jones lost 177.83 points or 0.65% to close at 27,154.20 points.

The week ahead sees July futures expire on Thursday the 25th. The current level of NIFTY at 11,419.25 points is down 526.65 points or 4.41% compared to June expiry of 11,945.90 points. With such a big advantage that the bears currently have they should easily be able to win the month by a big margin.

Readers would recall that post the announcement of exit polls on Friday evening on the 17th of May, all exit polls were more or less unanimous that the NDA would be back in power. Markets opened with a big gap when trading resumed the following Monday and results were announced on Thursday the 23rd of May. This gap began at 38,001 points on the BSESENSEX. The similar level on NIFTY was at 11,426 points which was just about breached on Friday. Effectively markets have given up the entire gains made post the gap up opening. Support exists for the market between 38,000 and 38,200 on the BSESENSEX and around 11,100 on NIFTY. These as of now look like they should hold in the short to medium term.

The advent of weekly futures on the two indices on NSE, namely NIFTY and Bank Nifty have increased volatility in the markets considerably. While markets may be fairly rangebound on four of the five days, come Thursday its super volatile. Not sure whether it adds to people’s wealth or erodes it. It certainly makes markets more difficult to understand. The week ahead sees both weekly and monthly expiring and this could make markets really volatile on Thursday.

Market players are looking for safety and are willing to pay a premium for the same. Take the case of HDFC AMC which saw its share price rise by 19% in a single week from Rs 1,947 to Rs 2,316. The company reported a good set of numbers even after SEBI had reduced the fees that an AMC could charge. This has actually turned out to be an entry barrier for new AMC’s as it has become that much more difficult to get a corpus for new funds from such houses. The share price of HDFC AMC has more than doubled from its issue price of Rs 1,100 in under a year. The EPS for the year ended March 2019 was Rs 43.78 and it is Rs 13.69 for the current quarter ended June 2019 versus Rs 9.68 in the year ago.

Reliance Industries declared its results and the revenue per person in the case of JIO has fallen. While the overall results show a growth, its refining and petrochemicals business were sluggish. This was offset by a strong show from retail and digital services business. The company has brought in Brookfield as an investor in its tower business at an investment of Rs 25,215 crs. This money would be used to repay debt amongst others. JIO will now pay rent on the use of towers going forward.

A key indicator from this is the fact that the IPO from JIO is that much closer now. While it would be just hazarding a guess, the same happening in around 12 months’ time is doable and could keep markets guessing.

The response from retail investors for the 5th tranche of the follow-on fund offer of CPSE ETF was indeed overwhelming with the same being subscribed over 5 times. Against the offer size with green shoe option being Rs 11,000 crs, bids were received for over Rs 40,000 crs. The discount too was cut by 0.5% to 3%. This happened on the day the markets fell so sharply on Friday. Incidentally the price of CPSE ETF gained 6 paisa on Friday from Rs 25.29 to Rs 25.35.

The week ahead would be volatile on account of the upcoming expiry. It would look to find support at some lower levels after being beaten down during the last two days. Shorting the market at these levels could be dangerous and investors would be well advised to look for buying support rather than shorting.

The week saw the budget fine print causing havoc in the markets on the first two days. These were the tax on buyback and the higher surcharge on income above Rs 2 crs. FPI’s have got covered under this section and the same created heartburn and panic in the markets. While the markets did recover on Thursday quite smartly and were doing reasonably well on Friday, a last hour sell-off on Friday put paid to hopes of a recovery. The BSESENSEX lost 777.16 points or 1.97% to close at 38,736.23 points. NIFTY lost 258.65 points or 2.19% to close at 11,552.50 points. The broader markets line the BSE100, BSE200 and BSE500 lost 2.08%, 2.09% and 2.09% respectively. BSEMIDCAP lost 1.17% and BSESMALLCAP was down 2.58%.

Titan Industries had a torrid time at the bourses. It lost Rs 177 or 13.85% to close at Rs 1,101.25. The company has been impacted by a weak quarter on account jewellery sales and a double whammy with the increase in customs duty. The 12.5% offers enough incentive for the precious metal to be smuggled and the increase in gold seizure explains the same.

Dow Jones had a decent week and gained 409.91 points or 1.52% to close at 27,332.03 points. The Indian Rupee surrendered some of its gains of the previous week and lost 26 paisa or 0.38% to close at Rs 38.68 to the US Dollar.

Results for the quarter kicked off with TCS announcing them on Tuesday and Infosys announcing post market close on Friday. TCS saw a revenue growth of 11.4% at Rs 38,172 crs and a net profit growth of 10.8% at Rs 8,131 crs. Infosys reported a revenue growth of 13.98% at Rs 21,803 crs with a net profit growth of 5.14% at Rs 3,798 crs. What is heartening to note from Infosys is that they have upped the guidance for the current year from 7.5% – 9.5% growth to 8.5% – 10%. This sends a strong signal to the IT industry even as Gartner has signalled a massive slowdown in IT spend.

Home grown retail chain D Mart has upped its performance significantly. It reported revenues of Rs 5,781 crs, an increase of 26.8%. Its net profit grew to Rs 335.3 crs, an increase of 33.8%. What is indeed surprising is the sharp increase in margins in an otherwise highly competitive environment to 10.3% at the EBITDA level and a PAT margin of 5.8%. The company over the last 4 quarters had reported significantly lower levels of margins. This performance is certainly creditable considering the competition from online and offline players.

Issues have begun to emerge over the buyback tax levied in the budget with the first casualty being listed entity KPR Mill Limited. They have written to SEBI stating that they cannot proceed with the buyback as the amount passed by the board and the shareholders would be exceeded on account of the tax and that they would have to borrow the money. Hence, they have decided to cancel the same. What SEBI decides and how the issue would be resolved, is anybody’s guess. This is the beginning of the buyback mess. There has been a demand that the buyback issues which are in the pipeline be grandfathered and that minority shareholders’ interests be safeguarded. How the tax department, the regulator and the government approach this issue would be critical for the future of about a dozen buybacks in the system.

Markets have more or less reacted to the budget and the same is behind us with the roughly 2% fall last week. Going forward with results season currently on, performance would be the key to decide market trends. If they have to move forward and gain ground, the key would be improved performance from corporate results. Nothing else currently can drive markets. We have enough headwinds on the global front which will act as deterrents for the rally, but if growth and performance is visible on the results front, then some gains could be expected.

Reliance Industries would declare results on Friday the 19th of July and this would give an indication of a large conglomerate connected with oil, petrochemicals industry besides telecom and retail.

The week ahead would see results determining the direction markets take. While post budget there has been a sell off on account of buyback tax and general disappointment to turn the economy on its head, the idea of shorting the market at this juncture looks a little dangerous. In case of confusion in one’s mind it would be best to refrain from doing anything.