The markets last week were under pressure and lost some ground. The rally which began a fortnight ago was stalled with the BSESENSEX losing 207.28 points or 0.77% to close at 26,635.75 points. NIFTY lost 50.75 points or 0.62% to close at 8,220.80 points. The broader markets too corrected with BSE100, BSE200 and BSE500 losing 0.45%, 0.35% and 0.15% respectively.
Elections to the Rajya Sabha for 2016 are over and the sum and substance of it is the gap between the Congress and BJP has narrowed significantly. In terms of alliances, the NDA is now ahead of the UPA. The large regional parties like the TMC, AIADMK, SP and BSP who are not part of any alliance are likely to decide the fate of the GST bill. With this change in the Rajya Sabha it is almost certain that the first item on the agenda of the Monsoon session of Parliament would be the GST bill.
The monsoon has begun its journey from Kerala and advanced to Goa. It’s almost there in Mumbai but not yet there. The pre-monsoon showers have begun but not good enough to bring down the heat and humidity. However the markets have already factored in the good monsoon which is expected. Currently valuations are on the richer side and offer little value for the discerning investor. Markets need to consolidate and allow earnings to improve post the monsoon in the next two quarters to allow ample money making opportunities.
The above does not suggest that there are no opportunities but the benchmark indices at current valuations look fully priced in. There is money to be made in stocks and companies which do not form part of the basket of stocks in the SENSEX or NIFTY and have room to move up.
Primary market activity is currently on the lull and there has been no issue since Parag Milk Products which happened a month ago. Next week is likely to see the issue from Mahanagar Gas Limited, the local CNG and PNG supplier to ‘amchi Mumbai’. This company is a JV between GAIL and British GAS. The best way to look at this company is to compare it with the listed player Indraprastha Gas which supplies similarly to Delhi.
The primary pipeline is choc a block with issues waiting to open but one is not sure for what they are waiting. They want markets to improve further (the markets are currently around 2016 calendar year highs) or they want the skies to burst, God alone knows. I firmly believe the market has the appetite for new issues currently and could easily take in 5-7 issues provided the issuer prices the issue in a manner whereby he leaves something on the table for investors.
I believe the markets will go nowhere in the immediate short term but would have a downward bias. Global events would see the US Fed having their meeting on Tuesday and Wednesday where they are expected to keep rates unchanged. There would be no major impact of this on markets globally. This would be followed by BREXIT where UK votes to decide its continuation in the EU at the end of the following week.
It’s time to take a break and enjoy the Mumbai rains as they happen this week.
