Super volatile market all this while as NDA scripts landslide win

Maharashtra CM Devendra Fadnavis, BJP MP Tejasvi Surya and Smriti Irani during the NDA parliamentary board meeting at Parliament House, in New Delhi.Pic/PTI

The markets last week were super volatile. They opened with a gap post the exit polls which were telecast on Sunday evening. The actual election results saw the National Democratic Alliance (NDA) led by the Bharatiya Janata Party (BJP) living up to in some cases, and beating the estimated exit polls comfortably in others, while registering a landslide win.

Highs, lows
Volatility during the week saw BSESENSEX make a high of 40,124.96 points and a low of 38,570.04 points, an intra week move of 1,550 points. Similarly, NIFTY made a high of 12,041.15 points and a low of 11,591.70 points for a weekly move of 450 points. Election day results saw the typical sell on news phenomenon and markets after gaining intraday over 1,000 points on the BSESENSEX closed with net loss of 300 points, while NIFTY after gaining 305 points lost 120 points.

Indian National Congress (INC) president Rahul Gandhi gestures while talking to Sonia Gandhi during a Congress Working Committee (CWC) meeting in New Delhi on May 25. Pic/AFP

Gains, wane
BSESENSEX gained 1,503.95 points or 3.96 per cent to close at 39,434.72 points while NIFTY gained 436.95 points or 3.83 per cent to close at 11,844.10 points. The broader markets saw BSE100, BSE200 and BSE500 gain 4.01 per cent, 4.11 per cent and 4.23 per cent respectively. BSEMIDCAP was up 4.45 per cent while BSESMALLCAP was up 5.85 per cent.

The top sectoral gainer was BSECAP GOODS which gained 10.92 per cent followed by BSEREALTY up 10.75 per cent and BSEBANKEX 7.06 per cent. The top loser was BSEIT down 1.86 per cent followed by BSETECK 0.95 per cent and BSEFMCG 0.35 per cent. In individual stocks the top gainer was Bank of Baroda up 22.31 per cent followed by Indus Ind Bank 20.09 per cent and Larsen and Toubro 13.36 per cent. The top loser was ITC down 3.73 per cent followed by Dr Reddy 3.06 per cent and TCS 2.23 per cent.

Bullish trend
FII's were bullish and bought on four of the five trading days. Their net purchases during the week was Rs 5,900 crore. Dow Jones was down 178.31 points or 0.69 per cent to close at 25,585.69 points. The Indian rupee gained 69 paisa or 0.98 per cent to close at Rs 69.53.

Suddenly there seems to be global tension which is taking over the world markets. The China US trade wars seem to be never ending. To top that there is tension between US and Iran, US and Venezuela and now Donald Trump has declared a state of emergency to clear sale of ammunition to Saudi Arabia, UAE and Jordan. UK premier Theresa May is to quit on June 7 as the Prime Minister after yet another failed Brexit deal. Oil continues to be volatile with so much of geo political action but on a softer trend.

The trajectory
After Indian elections, and a solid mandate followed by a stupendous rally, what next? Looking at the tension it may be said that India and its economy looks set to register growth. We have everything in place and oil now looking to settle at lower levels would help in making matters easier. If the monsoon holds true, things should be moving for the country.

The focus would be on infrastructure creation and the Bharat-mala and Sagar-mala projects would be continued vigorously. This would help in job creation as well. As far as markets go the next agenda would be cabinet formation and then the budget which would be presented in July. As the same government continues, a lot of work on budget has already been done. This year one could see some progress being made on strategic stake sale by DIPAM as well, and this is always welcomed by the markets.

The developments
There were a lot of developments in the week gone by. Reliance Capital has sold its stake in Reliance Nippon Asset Management Company to its equal partner, Nippon Life at R 230. This incidentally is below the issue price of Rs 252 during the IPO which was done during November 2017.

Naresh Goyal and his wife Anita Goyal the promoters of now grounded airline Jet Airways were not allowed to leave on a flight to Dubai on Saturday. A look out notice was issued against them and the flight which they had boarded was called back and they made to deplane.

The top management of Manpasand Beverages was detained under judicial custody by the Commissioner of Excise and Customs, Vadodara, for taking bogus credit of input credit under GST. The company is already under the radar when its auditors resigned same time last year. The share would again be under severe pressure when trading resumes on Monday morning.

The bullring
The week ahead sees May futures expire on Thursday, May 30. The present value of NIFTY at 11,844.10 points is higher by 202.30 points or 1.74 per cent. It is a clear advantage for the Bulls and with the kind of volatility witnessed during the month, Bulls should be able to have the upper hand. With election results declared and the uncertainty over, the volatility index levels have dropped by almost half and the premiums have significantly reduced. With the benchmark indices having performed and gained significantly, it would be quite logical to now expect the midcap and smallcap to play catch up.

Three rates
The rally in the market has not peaked and this could be the beginning of yet another rally. The political mandate gives the markets yet another chance to prove and register growth in corporate performance. Implementation of GST has happened and things are falling in place. The talk is of a single GST rate. When and at what rate that should happen is still debatable. If, however we even manage three broad rates it would be great progress.

Stock talk
Investors would do well to look at the midcap and smallcap sectors as the next leg of the rally would be in these stocks. A preview of the same was available recently where one saw these indices gain significantly more and outperformed the benchmark indices. Having said that it does not mean one can go and buy just anything. One has to buy stocks or invest in stocks which have performance and have registered growth.

Invest cautiously and with a longer-term horizon. The market has a long way to go but it will have its up and downs. It certainly will not be a one-way street.

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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