Ground slips away as weakness looms large

FM Arun Jaitley and Defence Minister Nirmala Sitharaman after attending a meeting in the wake of the Pulwama terror attack. Pic/PTI

Markets were weak and it can be gauged from the fact that they lost ground on all the trading days. BSESENSEX was down 737.53 points or 2.02 per cent to close at 35,808.95 points. NIFTY was down 219.20 points or 2.00 per cent to close at 10,724.40 points. The broader indices saw BSE100, BSE200 and BSE500 lose 2.33 per cent, 2.26 per cent and 2.30 per cent respectively. BSEMIDCAP lost 2.71 per cent and BSESMALLCAP was down 2.96 per cent.

The top sectoral gainer was BSEPOWER up 0.19 per cent. there were no other gainers. The top loser was BSEOIL&GAS down 4.22 per cent followed by BSEHEALTH CARE 3.93 per cent and BSEAUTO 3.59 per cent. In individual stocks, the top gainer was Yes Bank up 25.11 per cent. Zee Entertainment was 7.64 per cent and Tata Motors 6.48 per cent. The top loser Hindalco 9.18 per cent wasv followed by Mahindra and Mahindra 8.08 per cent, Hero Moto 7.84 per cent, Dr Reddy 7.76 per cent and State Bank of India 7.75 per cent.

Some questions
Dow Jones had a stellar week and gained 776.92 points or 3.09 per cent. It has been quite some time when there has been complete divergence between the Indian and American markets. The Indian rupee gained 8 paisa or 0.11 per cent to close at R 71.22 to the US Dollar. The terror attack on the CRPF by a suicide bomber who blew up his vehicle against an oncoming convoy has evoked protests. It has added to the political tension with elections due in about two months.

The window of new announcements and projects to be launched in the run-up to the election being notified is about three weeks away. Expect a slew of them as we get ready for the mother of all elections which will be a watershed one. Many parties would be fighting this election for their survival and a poor showing this time around could be disastrous for their future.

The issue of promoter finance against pledge of shares continues to haunt the market and individual shares. This week it was the turn of Apollo Hospitals and Emami. Emami had borne the brunt, last week as well. The greater issue however is the fact that this financing is being done by mutual funds and some NBFCs. When the issue becomes big, the extent of exposure looms large and issues crop up about the loan against shares. One wonders why mutual funds resort to this financing.

Stop signal
The golden run of mutual funds which saw huge inflows through SIP post demonetisation seems to have run its course and come to a halt. Live SIP accounts have fallen to 1.87 lakh accounts in December 2018 from 4.81 lakh accounts in April 2018. With the current state of the market, this situation is likely to worsen as returns are negative from the stock market. Markets are under pressure and are just not able to post decent gains on a weekly basis.

The week ahead sees crucial levels of support for the benchmark indices within 300 to 350 points. If these supports hold, one can expect a rebound for markets. If these levels break, we could have some amount of panic. Expect heightened volatility in the coming week. Resist the temptation to short the markets even though that is the direction they seem to be taking. Await confirmation of the trend as critical support levels come up this month.

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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