All eyes on infra this week

The infra sector has sanctioned projects and would provide a large number of jobs. Representation Pic/Getty Images

Yet another volatile week has come to an end at the bourses with the benchmark indices reaching new lifetime highs. BSE SENSEX gained 279.48 points, or 0.71 per cent, to close at 39,714.20 points, while NIFTY gained 78.70 points or 0.66 per cent to close at 11,922.80 points. The broader indices saw the BSE 100, BSE 200 and BSE 500 gain 0.73 per cent, 0.77 per cent and 0.82 per cent respectively. BSE MIDCAP was up 1.01 per cent and BSE SMALLCAP gained 1.14 per cent. The high of the BSE SENSEX was 40,122.34 points, while it was 12,039.25 points for NIFTY.

Ending on a positive note

The top sectoral gainer was BSE IT, up 4.36 per cent, followed by BSE TECK at 3.59 per cent and BSE POWER 2.49 per cent. The top loser was BSE AUTO, down by 3.22 per cent followed by BSE HEALTH CARE at 0.68 per cent and BSE FMCG at 0.36 per cent. The top individual gainer was Hind Petro, up by 7.12 per cent, followed by GAIL at 5.91 per cent and Indian Oil at 5.58 per cent. The top loser was Tata Motors, down by 5.30 per cent followed by Hero MotoCorp at 5.20 per cent and Bajaj Auto at 4.94 per cent. May futures, which was of five weeks, and included the volatile and uncertain period of the Lok Sabha election outcome, ended on a positive note. The series gained 304.10 points or 2.61 per cent to end at 11,945.90 points.

Dow Jones was sharply down and lost 770.65 points or 3.01 per cent to close at 24,815.04 points. Certainly, the US-China trade war is affecting both the countries and one is seeing definite signs of strain on the US economy. The technical structure of Dow looks weak and technical analysts believe that if it does not recover, there could be larger losses in the coming days and weeks. The Indian Rupee lost 15 paisa or 0.22 per cent for the Rupee to close at R69.68 to the US Dollar.

Cabinet 2.0

The Modi 2.0 cabinet was sworn in and the portfolio of key cabinet members had some surprises. Amit Shah, the administrative head of BJP, who was widely believed to be given finance, was given home affairs. Similarly, the glass ceiling was broken when the former defence minister Nirmala Sitharaman became the first woman to be a full-time Finance Minister. Rajnath Singh was allotted the defence ministry, while Piyush Goyal was given the railway ministry with the added responsibility of commerce and industry. As much

as 40 per cent of the outgoing ministry has been dropped and a 58-member strong cabinet sworn in. There is scope to permit an up to 81-member cabinet. Economic data during the week saw GST collection cross the trillion mark for the third consecutive month. The target for GST collection has been revised upwards but it still gives comfort. It would be interesting to see what changes the government does bring about for moving to one rate of GST in the budget slated for July 5. While it would not be one change on a single day, there would be a gradual merging of rates over time.

GDP slowdown

GDP for the fourth quarter came in at 5.8 per cent and for the full year 2018-19 at 6.8 per cent. It's a definite slowdown and would act as a strong reason for RBI to cut rates when it meets on June 5 and 6 for its monetary policy review meeting. With the same government coming back to power with a bigger mandate, inflation and fiscal deficit would certainly not be on the mind of RBI when they meet. While customarily, they have changed the policy rates by the customary 25 basis points, there is a strong case this time of taking a bigger cut. I believe the same could be 50 basis points this time around.

Maruti reported its poorest sales number in over seven years with sales at 1.34 lakh vehicles, down almost 22 per cent. Other auto companies too saw a slowdown. Maruti believes sales would grow between 4-8 per cent in the year 2019-2020. The impact of auto slowdown is hitting the auto part companies as well and many of these well-known names have shown a similar or worse slow down. Recovery could be a couple of quarters away at the bare minimum.

For the upcoming week

Markets are likely to see their breadth increasing with many smallcap and midcap stocks participating in the rally as we go forward. There is enough news flow and expectations to keep the market momentum intact. The week ahead would see markets continuing to remain volatile on a much lower scale than what we have seen over the last fortnight, and take cues from the RBI meet.

Pick stocks from the infrastructure space, because that is where the action would be. This sector has sanctioned projects, would provide a large number of jobs and has the capacity and capability to kick-start the economy which seems to be certainly slowing down.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Disclaimer: No financial information whatsoever published anywhere in this newspaper should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is for educational and information purposes only.

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