Will be volatile for a while

Finance Minister Arun Jaitley at the first Atal Bihari Vajpayee Memorial Lecture 2018, in New Delhi. Pic/PTI

Markets had yet another bad week and lost on four of five trading sessions. The BSESENSEX lost 966.32 points or 2.82 per cent to close at 33,34931 points. NIFTY was down 273.55 points or 2.65 per cent to close at 10,030.00 points. The broader indices like the BSE100, BSE200 and BSE500 lost 2.55 per cent, 2.48 per cent and 2.57 per cent respectively. bSEMIDCAP lost 1.34 per cent while BSESMALLCAP lost 3.45 per cent.

Realty rocks
The top sectoral gainer was BSEREALTY up 0.75 per cent. There were no other gainers but the one to lose the least was BSECONDUR down 0.07 per cent. The top sectoral loser was BSEIT down 5.73 per cent followed by BSETECK 4.97 per cent and BSEHEALTHCARE 4.63 per cent. In individual stocks, the top gainer was India Bulls Housing Finance up 4.71 per cent followed by Hind Petro up 4.64 per cent and Bharti Tele 3.99 per cent. The top loser was Yes Bank down 17.06 per cent followed by Sun Pharma 9.00 per cent and Ambuja Cement 8.66 per cent.

Under pressure
Dow Jones too was under pressure and lost 756.03 points or 2.97 per cent to close at 24,688.34 points. The Indian Rupee was volatile and at close lost 14 paisa or 0.19 per cent to close at Rs 73.46 to the dollar. October futures expired on a weak note with NIFTY losing 852.65 points or 7.77 per cent to close at 10,124.90 points. There was a sharp decline all through the month and bears were on top of the series throughout.

Current level
The current level of BSESENSEX at 33,349.31 points is down 707 points or 2.12 per cent on a year to date basis considering close of December 31, 2017. What is worrisome is the fact that it is down 5,640 points or 16.91 per cent from the high of the year of 38,989 points made in August 2018. Similar levels for the NIFTY are 500.70 points or 4.99 per cent on a year to date basis and 1,730.20 points or 17.25 per cent from the August high.

BSEMIDCAP is down 28.49 per cent on a year to date basis while BSESMALLCAP is down 41.43 per cent. Even Dow Jones is down and its current level of 24,688.34 points is a loss of 1,928.37 points or 7.31 per cent from the high and is virtually flat on a year to date basis, down 30.91 points. Trade war is hurting every country.

Losing grip
NBFC stocks have been under pressure for some time now. Bandhan Bank has been under pressure ever after RBI mandated that the salary of the promoter CEO would remain frozen and the bank would not be allowed to open new branches until the promoter holding as mandated was brought down. During the week, the share price briefly went below the issue price. The share has fallen from a high of Rs 741.80 to close at Rs 381.25. During the week, the share lost Rs 35.75 or 8.57 per cent. The issue price was Rs 375.

Free fall
Two new stocks from the microfinance space have become small finance banks or SFBs. These are Equitas holdings Limited and Ujjivan Financial Services Limited. These companies had gone public in April 2016 and they were mandated that they would list the bank and dilute the promoter holding within three years of listing, which period would expire in April 2019. At the time of their respective IPOs, the merchant bankers and the management of the companies were of the firm opinion that they would be allowed to fulfil the requirements by just listing the holding companies. Once RBI showed the rule book, all hell broke loose.

Two issues
Equitas Holdings Limited had listed in April 2016 and issued shares in a price band of Rs 109-110. The share had made a high of Rs 173.65 and a low of Rs 77.85. In the week gone by the share closed at Rs 99.05, a loss of Rs 26.75 or 21.26 per cent. Ujjivan had listed at around the same time and had offered shares in a price band of R 207-210. The share had made a high of Rs 434.75 and made a low of Rs 166.50. The share last week lost Rs 49.30 or 21.39 per cent to close at Rs 181.15.

Interestingly, the growth in earnings of almost 2.5 years was negated in the fall and both issues are now trading below issue price. Shares of A U Small finance bank were also hammered and lost significant ground. Against a high of Rs 745, shares are now trading at Rs 528.

Rebound ace
Markets have been under pressure for quite some time now and it appears a temporary bottom is likely to happen very soon. There would be a sharp and short rebound from there and markets would make a couple of attempts to retest the bottom so made. This would offer ample trading opportunities. It therefore makes sense to buy on any sharp dips and sell on rallies and use a trading mentality in the coming few weeks. Markets will continue to remain choppy and volatile.

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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