It was a great week at Dalal Street and it appeared that the bulls decided to have Diwali celebrations a week earlier. There were gains on three of the five trading days, one day of correction and one day of a flat market. The gains on the BSESENSEX were 1,662.39 points or 4.98% at 35,011.65 points. NIFTY gained 523 points or 5.21% to close at 10,553 points. This is the best weekly performance in a long time and certainly the best in 2018. The broader markets saw the BSE100, BSE200 and BSE500 gain 5.45%, 5.59% and 5.69% respectively. BSEMIDCAP gained 7.34% and BSESMALLCAP was up 6.38%.

The Indian Rupee had a good showing and gained 97 paisa or 1.32% to close at Rs 72.49. Dow Jones gained 582.52 points or 2.36% to close at 25,270.83 points. Crude oil too softened and all in all it was a great week for India where the markets went up, rupee appreciated, and crude oil price softened.

Sanctions against Iran kick in from this week, but some exemptions have been given to eight countries including India. It appears that India would pay for Iranian crude oil in rupee terms through Uco Bank which does not have any international branches and therefore has no risk of sanctions.

The NBFC crisis would get resolved to a great part once the 14th of November passes with a very large number of CP’s (commercial papers) due for payment or roll over. Once all the NBFC’s have paid or successfully rolled over the current crisis in the stock markets would be averted and things would start moving to business as usual.

The SFB crisis of last week has been partially resolved with Equitas holdings announcing that they would dilute by creating a separate company in which the SFB or small finance bank is housed and then move to creating a merger of the two entities. Readers would recall this issue as being highlighted by e even at the roadshows of the concerned companies. While one has announced its decision the other company Ujjivan Finance is yet to announce their course of action, but it must be on similar lines. RBI is the boss and there are no two ways about it as far as SFB’s, NBFC’s or banks are concerned.

The week ahead sees Diwali and there would be ‘Muhurat Trading for an hour on Wednesday the 7th of November between 5.30 pm to 6.30 pm. Thursday would be a holiday and therefore one is likely to see profit taking on Tuesday in the second half of trading. What happens on Friday would depend on events in the US with China trade wars and elections due on Tuesday the 6th of November, where the Democrats are expected to fare better and cause problems for the Republicans.

The week has been good with relief and joy on markets, crude and the rupee and it has come at the right moment. Markets will look to build on these gains and with corporate results providing some help should be able to do so. While markets will be choppy and the gains going forward not as sharp expect markets in the near short term to trade with a positive bias.

Wishing all readers a Happy Diwali and Prosperous New Year Samvat 2075.

With losses on four of the five trading days there could be only one outcome, a weak week and continuing losses for the benchmark indices. BSESENSEX lost 966.32 points or 2.82% to close at 33,34931 points. NIFTY was down 273.55 points or 2.65% to close at 10,030.00 points. The broader indices like the BSE100, BSE200 and BSE500 lost 2.55%, 2.48% and 2.57% respectively. BSEMIDCAP lost 1.34% while BSESMALLCAP lost 3.45%.

Dow Jones too was under pressure and lost 756.03 points or 2.97% to close at 24,688.34 points. The Indian Rupee was volatile and at close lost 14 paisa or 0.19% to close at Rs 73.46 to the dollar.

October futures expired on a weak note with NIFTY losing 852.65 points or 7.77% to close at 10,124.90 points. There was a sharp decline all through the month and bears had the series under control throughout.

The current level of BSESENSEX at 33,349.31 points is down 707 points or 2.12% on a year to date basis considering close of 31st December 2017. What is worrisome is the fact that it is down 5,640 points or 16.91% from the high of the year of 38,989 points made in August 2018. Similar levels for the NIFTY are 500.70 points or 4.99% on a year to date basis and 1,730.20 points or 17.25% from the August high.

BSEMIDCAP is down 28.49% on a year to date basis while BSESMALLCAP is down 41.43%. Even Dow Jones is down and its current level of 24,688.34 points is a loss of 1,928.37 points or 7.31% from the high and is virtually flat on a year to date basis, down 30.91 points. Trade war is hurting all countries no doubt.

Markets have an uncanny habit of finding their soft target each week. NBFC’s have been in the thick of action for quite some time and this week it was the SFB’s or small finance banks. Two prime examples of the same were Equitas Holdings Limited and Ujjivan Financial Services Limited. These companies had gone public in April 2016 and they were mandated that they would list the bank and dilute the promoter holding within three years of listing, which period would expire in April 2019.

When they had gone public, this issue was raised, and this writer was one of them who had vociferously raised two points. The first was about listing of the bank and its dilution and the second was about costs involved with the small finance bank being set up. The companies which are listed are the holding companies which in turn own the microfinance business. The reply given was that the management and the merchant bankers have spoken to RBI and their viewpoint would be considered and the issue amicably resolved. The issue which had the potential of becoming a major risk was never highlighted.

It all began with Bandhan Bank which has been under pressure ever after RBI mandated that the salary of the promoter CEO would remain frozen and the bank would not be allowed to open new branches until the promoter holding as mandated was brought down. During the week the share price briefly went below the issue price. The share has fallen from a high of Rs 741.80 to close at Rs 381.25. During the week the share lost Rs 35.75 or 8.57%. The issue price was Rs 375. On Friday RBI informed that the guidelines issued for SFB’s would have to be taken care of as mentioned when they were given licenses. This clarification of the rule saw these two shares being hammered.

Equitas Holdings Limited had listed in April 2016 and issued shares in a price band of Rs 109-110. The share had made a high of Rs 173.65 and a low of Rs 77.85. In the week gone by the share closed at Rs 99.05, a loss of Rs 26.75 or 21.26%. Ujjivan had listed at around the same time and had offered shares in a price band of Rs 207-210. The share had made a high of Rs 434.75 and made a low of Rs 166.50. The share last week lost Rs 49.30 or 21.39% to close at Rs 181.15.

The action in these shares has just begun and Friday was the first day. When and at what level would the market be comfortable, is a million-dollar question. This being India, there can be no class action suit against the merchant bankers, otherwise if it was the US, they would be running for cover. Sell the issue and to hell with the consequences. Let market find and grapple with the risks themselves. Unpardonable what the merchant bankers have done and hope the management has spine to issue clarifications and action being taken.

AU Small Finance Bank which is yet another company to list in recent times also saw large value destruction. This is also a small finance bank. This is not to exclude the general carnage that one is seeing in the NBFC space and the destruction in share price of Yes bank which was down another 17.06% at Rs 180.55. IndusInd Bank too joined the affected list after the exposure to ILFS was disclosed and lost 8.37% at Rs 1,445. The share had made a 52-week high of Rs 2,038. The share is trading at around its 52-week low.

Markets would continue to remain choppy and volatile in the week ahead. We have no bottom in place yet, but it is likely to happen sooner than later. Recoveries from such levels are very sharp and short and normally one sees markets retesting bottoms a couple of times. This sharp two sides movement would provide ample opportunity to trade and one should take advantage of the same. Buy on sharp dips and sell on rallies.