What goes up also comes down

The week gone by had all the action and drama that could be thought of and finally the inevitable correction came. Call it the Iraq factor or the coincidental Friday the 13th effect, markets fell and suddenly people realised that what goes up also comes down. The markets fell sharply from the Sensex highs of 25,725 and the Nifty's 7,700. Though the weekly close saw small losses on the benchmark indices, individual stocks were battered.

The Indian share bazaar has seen a steady rise in stocks since the Modi-lead government has come to power. PIC/AFP

Losses
The BSESENSEX lost 168.29 points or 0.66 per cent to close at 25,228.17 points while Nifty lost 41.20 points or 0.54 per cent to close at 7,542.10 points. The broader indices like BSE100, BSE200 and BSE500 lost more at 1. Followed by BSEHEALT, 1.14 per cent and 1.13 per cent while BSEMIDCAP lost 1.79 per cent and BSESMALLCAP lost 1.02 per cent.

In sectoral indices, the top gainer was BSEIT up 5.89 per cent followed by BSEHEALTHCARE up 4.13 per cent and BSETECK 3.59 per cent. The losers were led by BSEREALTY down 6.26 per cent, BSEPSU down 5.96 per cent and BSEOIL&GAS down 5.22 per cent.

In individual stocks, the top gainer was HCL Tech up 8.06 per cent followed by Infosys up 6.07 per cent, Tech Mahindra up 5.94 per cent and DR Reddy up 4.13 per cent. The top loser was Hind Petro down 13.82 per cent. Others included DLF down 11.97 per cent, Indian Oil down 10.72 per cent, LIC Housing down 10.70 per cent and Union Bank down 9.48 per cent. The markets have been attempting to make new highs and were finding resistance at the top.

Friday saw markets opening quite steady and then they just cracked mid-afternoon. The reason attributed for the fall was sharp rise in crude oil prices, post internal strife in Iraq. This issue has been on for days, the markets chose to ignore it initially but reacted sharply on Friday.

Currency
Dow Jones closed at 16,775.74 points down 148.54 points or 0.88 per cent. FIIs were buyers in the cash segment with net purchases of R 4,900 crore while domestic institutions seem to have slowed down their sales and were net sellers of Rs 239 crores. The Indian rupee was under pressure and closed at Rs 59.77, down 60 paisa or 1.01 per cent.

IIP or industrial production for April 2014 rose to 3.4 per cent led by strong showing from capital goods and electricity. The second point of good news was on the inflation front when CPI (Consumer inflation) for May fell to 8.28 per cent from 8.59 per cent in April. While one month is too early to predict a trend but the same is a welcome sign and the new government would be hoping that the trend continues to remain positive.

Infosys finally has a new CEO in Vishal Sikka who is an ex-Nokia person. The board led by Narayana Murthy elected/selected Sikka as the new CEO and also promoted 12 persons. It would also mean that the second innings of Murthy was not as successful as people would have expected. Anyway, all's well that ends well and one hopes that things improve. Shares from the IT and healthcare sectors were the few that were positive.

Stocks
PSU stocks would be in the limelight going forward. The government needs resources so some of it would have to come from divestment and towards this end SEBI has said that all listed companies must have a minimum of 25 per cent of public shareholding. Secondly, the PSU banks need large amount of capital infusion to meet Basel III norms.

On the other hand, the PJ Nayak committee report says that the government needs to reduce shareholding in banks. Both these objectives can be met in one stroke if PSU banks do fund raising by way of rights issue and the government does not subscribe to its entitlement.

The markets are taking the much needed correction which may last for a couple of days or a week depending on the Iraq situation. The fall in prices is a good opportunity for those who have missed the bus or did not have the courage to enter the markets earlier. The next big driver would be the budget which is about four weeks away.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website https://ak57.in

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