Markets have a mind of their own and they behave irrationally when they are exuberant. What
better example of this can there be other than what happened after the US Fed announced a rate
cut of 50 basis points on Wednesday US time. What did the markets do? They rallied strongly and
then closed in the negative after getting the cut of 50 basis points in the US. The next day they
rallied and Friday was yet another day. At the end of it all, the rate cut gave the ammunition to
markets globally and they were on fire when they closed for the week.
Our markets made new highs on an intraday basis and closed at new highs as well. BSESENSEX was
up 1,653.37 points or 1.99% to close at 84,544.31 points while NIFTY gained 434.45 points or 1.71%
to close at 25,790.95 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 1.52%,
1.29% and 1.06% respectively. BSEMIDCAP was down 0.16% while BSESMALLCAP was down 0.08%.
Not significant in value but the outperformance that the sector has been displaying, took a severe
beating. Would it reflect in a correction in the coming days and weeks, only time will tell, but one
should turn cautious.
The big turnaround rally witnessed on Friday was reflective of rebalancing in the weightages of FTSE
all world and FTSE all cap indices that went through semi-annual rebalancing. More than a billion US
Dollars have flowed in on this count on Friday itself and it reflects in the net FPI buying on Friday
which was Rs 14,064 crores. Domestic Institutions were sellers of Rs 4,427 crores.
The interest rate cut of 50 basis points in the US saw the band being fixed at 4.75-5.0%. The FED has
also said that there would be two more rate cuts of 25 basis points in the two meetings remaining
for the current calendar year. This saw a flip-flop in the US markets on Wednesday post the rate cut
being announced. Markets rallied initially and were up 381 points before profit taking saw markets
lose and close in the negative, down 103 points. They rallied strongly on Thursday and gained 478
points. At the end of the week, Dow gained 669.58 points or 1.62% to close at 42,063.36 points.
In primary markets news, we had four listings in the last week of which three listed on Monday. The
top of the charts was the stellar listing from Bajaj Housing Finance Limited. The company had issued
shares at Rs 70 and the discovered price was Rs 150, a gain of Rs 80 or 114.28%. It then gained
further and closed at upper circuit of Rs 165, a gain of Rs 95 or 135.71%. While Bajaj Housing had a
stellar debut, the shares of eight other Housing Finance companies lost between 7-9%. Defies logic
as to why it happened as Bajaj Housing is not a new player and it does not involve shift in market
share. The only impact would be that it is a listed player and that’s it. Secondly the peak market
capitalization of the company made on Wednesday at a price of Rs 188.45 per share was a
staggering Rs 1.56 lakh crores. This market cap was greater than the next eight companies from the
housing finance sector put together. Is this sustainable? Only time will tell. The share lost ground
and closed at Rs 163.74, a gain of Rs 93.74 or 133.91%. At this price, the market cap is now at Rs
136.36 lakh crores. Significantly, the share closed lower than the close of Monday at Rs 165.
Euphoria continues to drive the momentum in markets and the twin facts of FED rate cut and FTSE
rebalancing were the drivers for last week’s rally. With markets at lifetime highs on both an intraday
basis and closing basis, it’s time to take stock of what the upcoming July-September results could
have in store for all of us. The previous results for the April to June quarter, saw the slowest growth
in the last nine quarters and were disappointing. While being optimistic is fine, one should have a
pool of money available to take advantage of the situation when needed.
The week ahead sees September futures expire on Thursday the 26 th of September. The current
value of NIFTY at 25,790.95 points is higher by 639 points or 2.54% compared to the previous

month’s close of 25,151.95 points. In normal circumstances this would be a comfortable lead, but
considering that as much as 375 points or 58.68% came on just Friday, it could be much closer than
what the number indicates. One should take some money off the table and trade cautiously. Sector
rotation is on, no doubt. While in the previous week IT was the performer, this week they were the
laggards with Banking and Auto chipping in as the start performers. FMCG giant Hindustan Lever also
had a great showing.
In conclusion, trade cautiously as markets seem to be in the midst of irrational exuberance.

In the last three to four weeks, one finds that a single day’s movement whether upward or downward makes the trend or direction of the whole week. In the previous week it was the movement on Thursday the 12th of September while in the week prior to that it was on Friday the 6th of September. While Thursday was a sharp up day, Friday was the opposite and was a down day. In a week where markets gained on three of the five trading sessions, one saw the BSESENSEX gain 1,707.01 points or 2.10% to close at 82,890.94 points while NIFTY gained 504.35 points or 2.03% to close at 25,356.80 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.88%, 1.96% and 1.90% respectively. BSEMIDCAP was up 1.52% while BSESMALLCAP was up 2.05%. Gains made on Thursday were 1,439 points on BSESENSEX and 470 points on NIFTY. 

The Indian Rupee gained 6 paisa or 0.07% to close at Rs 83.89 to the US Dollar. Dow Jones had another terrific week gaining 1,048.37 points or 2.60% to close at 41,393.78 points. This comes ahead of the week in which the FED meets to decide on interest rates where it is believed that there would be a cut of between 25-50 basis points. The meeting is slated for Tuesday-Wednesday and the impact of the same on the Indian markets would be felt on Thursday. The ECB had cut rates by 25 basis points earlier this week. While a cut in the US is a certainty, the impact on markets post the cut is causing confusion amongst traders. It’s therefore best to leave it at that and allow markets to react post the cut based on what markets actually do. 

In primary markets we had four issues opening and closing during the week gone by. One of them, Bajaj Housing Finance Limited has created a new record in terms of subscription and number of applications. The issue was for a size of Rs 6,560 crores and raised a whopping Rs 3,24,022 crores through 90.73 lac applications. No previous issue has received so much money or so many applications ever before. This shows the liquidity in the markets, euphoria towards IPOs and the craze that people have for more making a quick buck through an IPO. 

Continuing on Bajaj Housing, the issue is priced at Rs 70 and if the grey market is any indicator, the share should list at a premium of over 100%. At this price, the company would have a market capitalization of over Rs 1 lakh crores on listing. The price to book of the company would be a steep 6 times and over and would become reason for the entire housing finance sector to be re-rated as the difference between the peer and the others try to catch up. Expect the rest of the sector to move up on the back of the strong showing of Bajaj Housing Finance Limited. 

The best of the lot is PNB Housing Limited which has a NAV of Rs 607 and is trading at Rs 1136, a price to book of under 2. This is followed by LIC Housing. While Aadhar Housing is also comparable, it is more expensive than PNB Housing but much cheaper than Bajaj Housing. One should expect the housing finance companies see a lot of action today and in the week to follow. 

The AUM of the mutual fund industry continues to receive excellent response from investors across categories. The AUM of the industry has risen by Rs 1.07 lakh crores in the month of August to Rs 66.04 lakh crores. Part of this is the retail segment and they seem to be a very big driving force of liquidity that the domestic institutions are flooded with. 

Markets hit new fresh intraday and closing highs on Thursday the 12th of September. The levels were 83,116.19 points on intraday basis and 82,962.71 points on closing basis on BSESENSEX and 25,433.35 points and 25,388.90 points on NIFTY. These levels would become important as markets continue to build on them in their journey forward. 

The week ahead would see a couple of issues open and close during the week. Besides this there would be five issues being listed during the week with three of them happening on Monday itself. Monday would include the listing of Bajaj Housing Finance which would be very keenly watched as well. 

Coming to the markets in the week ahead, it would be driven by events and news flow. Monday would see three listings and the performance of the same would have a bearing on the housing finance sector as a whole and the market as well as a new one lakh crore market cap company gets listed. The market cap at issue price was roughly Rs 58,000 crores. Tuesday and Wednesday in the US would see the FED deciding on interest rates. The way markets in the US take the rate cut quantum and the commentary thereafter would have a direct bearing on our markets on Thursday. 

Key supports for the markets are the psychological levels of 25,000 on NIFTY and 81,800 on BSESENSEX. If these are violated, support exists at the previous low made at around 24,850 and 81,500 points respectively. On the upside the highs made on intraday basis on Thursday would act as minor resistances. If these are broken upwards with momentum we could see up to a three percent up move over the coming 5-7 days from the levels of 83,100 and 25,430 points. 

The strategy for the week would be to keep positions light on Wednesday prior to the US Fed announcement as that could be a very volatile and irrational day. Trade for the first three days with longs and strict losses but reducing overnight exposure on Wednesday. Post FED event fresh positions may be initiated. While momentum is in favor of bulls, one should be cautious as we are in uncharted territory and the same should be backed by strict stop losses.