No sizzle, only fizzle

The week gone by saw a lot of drama with the BSESENSEX losing 691.96 points or 3.56 per cent to close at 18,735.60 points. The NIFTY lost 221.25 points or 3.77 per cent to close at 5,651.35 points. The broader market saw the BSE100, BSE200 and BSE500 losing 4.17 per cent, 4.22 per cent and 4.29 per cent respectively. The BSEMIDCAP and BSESMALLCAP lost 4.80 per cent while the smallcap lost 6.58 per cent.

Causes
The RBI Governor delivered as expected and cut repo rates by 25 basis points. What spooked the market was Dravida Munnetra Kazhagam (DMK) withdrawing support to the United Progressive Alliance (UPA) government and subsequently sending resignations of their ministers to the President. The decision by the Cyprus government to levy a deposit tax which has subsequently been deferred or ruled out rattled global markets and put them under pressure on the opening day of the week itself. Negotiations reduced the fear from such a levy but were enough to shake our markets. They have now closed in negative territory for six consecutive days and with this weekly fall, are in negative territory for the year. The SENSEX is down 3.55 per cent for the calendar year while the NIFTY is down 4.29 per cent.

Dravida Munnetra Kazhagam (DMK) leader Dayanishi Maran (C) comes out of Parliament in New Delhi on March 20, 2013, even as ministers from his party handed in their resignations. Pic/AFP

The BSEFMCG was the only gainer up 0.07 per cent. The losers were led by BSEREALTY down 13.04 per cent. The other losers were BSEPSU down 7.58 per cent, BSEMETAL down 6.87 per cent and BSECAP down 6.79 per cent. In individual stocks, ITC gained 1.03 per cent, Hindustan Unilever was up 0.25 per cent and Titan was up 0.20 per cent. On the losing side were Manappuram Finance down 31.19 per cent, HDIL down 28.99 per cent, Hindustan Copper down 17.04 per cent and RCF down 15.34 per cent. In the regular stocks, PFC lost 11.02 per cent, JSW Steel lost 11.62 per cent, Canbank lost 11.63 per cent and Tata Steel lost 9.10 per cent.

Divestment
Yet another divestment was concluded where LIC, SBI and other PSU banks helped bailout the government in the divestment of SAIL. The issue had a floor price of R63 and the indicative price was R63.07. The divestment helped the government raise R1,516 crore. The divestment seems to be turning out to be a big drag on the market and a mere mention of divestment brings down the share price. Coal India was mentioned as being a likely divestment candidate and immediately the price fell to a level last seen only in February 2011. Other companies whose shares were recently divested and where such a fall is seen include: Hindustan Copper, down 40 per cent compared to its OFS price; RCF down 20 per cent; NALCO (divested last Friday) down 10.16 per cent. The government needs to rethink its strategy on divestment and come out with something different than what is being planned and done currently.

Foreign
FIIs continued to be buyers of equity worth R919 crore while domestic institutions sold shares worth R361 crore. The pace at which FIIs have been investing has certainly slowed down compared to what it was in the beginning of the year, though they are yet to stop buying completely. The Indian Rupee lost ground to the dollar slipping 32 paisa or 0.59 per cent to end the week at 54.33 to the US Dollar.

Futures
This week has two holidays: Wednesday for Holi and Friday for Good Friday. On the Thursday in between, the March futures will expire. The previous series in February had expired at a level of 5693.05, which is higher than the current market by 0.74 per cent. This series has been volatile with the high of the month being 5,971 and the low being 5,631. Considering that the current market is quite near the previous month's expiry, there may not be much volatility in the three days to expiry.

Ahead
The week is likely to open on a positive note simply because the markets have now been losing for six consecutive sessions and a technical bounce is overdue. Secondly, because the financial year is coming to an end, there may be some Net Asset Value (NAV) propping done by mutual funds to shore up their values. The end of futures series and the NAV exercise may lead to some interest in a fairly lacklustre market but should not be the reason to want to take any positions in the market. It is best if one sits it out for some time and allows the market to create a base of its own before entering it.

Key levels for the SENSEX are 18,600 and 18,975 while similar levels for the NIFTY are 5,605 and 5,755 respectively. The BSESENSEX has support at 18,649 points, then at 18,577 points, then at 18,459 points and finally at 18,255 points. It has resistance at 18,840 points, then at 18,969 points, then at 19,045 points and finally at 19,137 points. The NSENIFTY has support at 5,624 points, then at 5,567 points, then at 5,534 points and finally at 5,448 points. It has resistance at 5,684 points, then at 5,745 points, then at 5,799 points and finally at 5,844 points.
With the financial year 2012-2013 coming to an end, let's hope 2013-14 brings better times for investors.

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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