Falling crude prices have come as godsend for India and are helping in curtailing the deficit on the fiscal front. Petrol and diesel prices have been cut once again and it appears that oil marketing companies never had it so good. Helped by liquidity markets made yet another high on the first day of trading of the December series and the last day of November month. GDP numbers for the second quarter of July-September 2014 were 5.3% against 5.7% of the first quarter and 5.2% of the year ago period. GDP for first half 14-15 is now 5.5% against 4.9% last year. Better, but things could have been better.
NSE is feeling the heat from BSE and has reduced transaction charges by 40%. This clearly shows that volumes are shifting to BSE or that BSE is gaining market share and traction. Competition is welcome and the gap between transactions charges on the BSE compared to NSE remain substantial even after this 40% cut. If members and clients want charges to be reduced further they have to ensure that BSE volumes rise further. One man’s food is another man’s poison but here there are only gainers with the customer being king.
SEBI has once again proved that they are consistently inconsistent. A month ago in the case of DLF they held the promoters andkey personnel responsible for non-disclosure of information in their offer document but held the signing off authority the merchant bankers not responsible. Here in the case of CARE, the company or its promoters are not responsible but merchant bankers are held responsible and have been fined the maximum permissible Rs 1 cr fine. Why in a span of a mere one month two diametrically opposite orders form the same regulator? It is not only baffling and intriguing but makes people worried. This inconsistency and the fact that the regulator interacts only with merchant bankers and never promoters or their authorised representatives makes one wonder how do you get your doubts if any cleared. DLF has its matter pending now with SAT the tribunal, and one can be sure that this inconsistent order from SEBI will be hotly debated and discussed.
There is an IPO from Monte Carlo opening on Wednesday and in keeping with the few IPO’s of this year will be heavily subscribed by the HNI category where funding is available quite cheap. It makes sense to apply for 23 shares as a lottery ticket as the retail portion is likely to get subscribed by 2.75-3.25 times. The issue is expensive no doubt and the application should be for listing gains. More on the issue post the anchor allocation which happens on Tuesday.
Tuesday the 2nd of December RBI meets for its monetary review. The stock market has already discounted in advance a 50 basis points cut while RBI is on record saying that a cut currently looks difficult. The Finance Minister is slated to meet the governor on Monday and impress upon him the government’s resolve to containing and keeping inflation under check. What Tuesday finally brings will be keenly watched. However what is worth noting is the comments made by Raghuram Rajan at the Kurien memorial lecture where he mentioned that amounts written off by banks over the last five years is a massive 1.62 lac crs. I believe the entire banking system does not earn this kind of amount in a year and this is why our system is burdened with bad quality assets. The governor further adds that when bad debts rise the premium on lending to the sector increases and this increased cost of borrowing is to be paid by all. Very very telling of the governor and reveals his mind set on the cut in interest rates being demanded.
The markets will be volatile and one needs to be cautious and nimble footed in such times. Trade cautiously.
December musings on the first trading day
Performance of Newly Listed Shares as on 28th November 2014
| Name | Date of listing | Issue Price | closing price | closing price | % gain loss | change over | ||
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over week | lssue price | |||||
| Snowman Logistics Limited | 12th September | 47.00 | 111.00 | 113.70 | -5.74 | 136.17 | ||
| Sharda Cropchem Limited | 23rd September | 156.00 | 272.90 | 272.60 | 0.19 | 74.94 | ||
| Shemaroo Entertainment Limited | 1st October | 170.00 | 200.35 | 205.10 | -2.79 | 17.85 |
Random thoughts on Monday morning
Then markets did nothing for the first four trading sessions of the week but what happened on Friday remains a mystery even on Monday morning. FII’s have turned cautious and have reduced their purchases significantly. Secondly though they are still net buyers in equity though small, they are sellers in futures and options. While global markets are making new highs, snap polls called in Japan could add to uncertainty as to how long recession would continue.
The week ahead sees parliament beginning its winter session from Monday. The government does not enjoy a majority in the upper house and therefore it becomes important to see how the opposition and the ruling party behave in passing the bills and general conduct in the house. Besides this the expiry of futures November series happens on Thursday the 27th of November. The current close of NIFTY is higher by 308 points or 3.77%. While the gains look comfortable from the bull’s perspective, one never knows when markets can turn bearish and surrender these gains.
SEBI at its board meeting has made important changes on two broad fronts. The first is on the definition of who is an insider and now associates and employees have been included. Of course a person identified as an insider would automatically include his relatives as defined earlier. Second is that changes have been proposed to the delisting norms where a minimum of 25% percent of shareholders must tender shares and the company should reach shareholding of 90%. While changes are always welcome there are issues which crop up. For example in the first case SEBI says that the onus of proving that the person concerned or the accused did not have sensitive information is on the individual concerned. With SEBI having such wide powers it should be asked to prove the existence of sensitive information and not the accused.
With the clamour for rate cuts increasing and Bond Street seeing a reaction with yields falling, it appears that rate cuts have already happened. There is always a slip between the cup and the lip and one knows how hopes have been dashed in the past. The way I look at it is slightly different, that with rate cuts not having happened for such a long time, a 25 basis points cut is neither here nor there and a 50 basis points cut now is impossible. Seeing the economic data a possible rate cut of 50 basis points seems most likely in February just before the budget which would add impetus to a growth oriented budget.
Valuations are rich and actually quite rich but mood and optimism seem to be overtaking rationality. If I were to try and analyse what happened on Friday in the market most apt would be the ‘FFFF’ theory which is Friday Feel Fine Factor. The mood is changed post day’s trading and then electronic media takes over hammering the fact that markets have done so well. Typically post such a day markets then reverse the next day or the following day in the short term. Our markets need a breather and what better time today or tomorrow. Expiry is four days away and bulls are in complete control as of today.
Enjoy the market mood and soak in the political drama which begins today but trade cautiously.
