As markets gain momentum, experts see a gradual slowdown

Gains give way to a gradual downslide; take money off the table and see wisdom in patience

A ritual is in progress, with 18 types of grains, and a water filled pot, for the monsoon and crops, at Bhendwad village in Buldhana in Maharashtra. Pic/PTI

Markets continued to gain for a fourth consecutive week but it appears that the momentum is slowing down. BSESENSEX was up 222.93 points or 0.65 per cent to close at 34,415.58 points. NIFTY was up 83.45 points or 0.79 per cent to close at 10,564.05 points. The broader indices like the BSE100, BSE200 and BSE500 gained 0.85 per cent, 0.89 per cent and 0.90 per cent respectively. BSEMIDCAP was up 0.72 per cent while BSESMALLCAP was up 1.08 per cent.

Tip top
The top sectoral gainer was BSEMETAL up 4.32 per cent followed by BSEIT 4.15 per cent and BSEFMCG 3.95 per cent. The top loser was BSEOIL&GAS down 2.32 per cent followed by BSEBANKEX 1.61 per cent. In individual stocks, the top gainer was TCS up 7.50 per cent followed by Bharti Tele 5.73 per cent and ITC 5.49 per cent. The top loser was Axis Bank down 7.13 per cent followed by Tata Motors 6.07 per cent. The three oil marketing companies were big losers too with HPCL down 11.66 per cent followed by BPCL 9.08 per cent and IOC 2.96 per cent. The worry is that with elections in Karnataka, these companies would not be able to pass on the crude price hike coupled with the fall in the rupee value. While this is true, the fact that they would report sharp inventory gains in the quarter under review is also correct. The price constraints if at all true would be for a very short time.

Monsoon mood
The monsoon is expected to be 97 per cent normal of the long-term average and this augurs well for agriculture and a greater part of India's economy. Some of the gains witnessed in the market is because of this forecast from the MET department and similarly two other private agencies. Dow Jones managed marginal gains and was up 102.80 points or 0.42 per cent at 24,462.94 points. The Indian Rupee was under considerable pressure and lost 92 paisa or 1.39 per cent to close at R 66.12 to the US Dollar. The week ahead sees the April futures expiring on Thursday, April 26. Currently, the bulls have an upper hand with the series trading at 10,564.05 points, a gain of 450.35 points or 4.26 per cent. The momentum is slowing down and the bulls may have a hard time to keep the gains in the remaining four days of the series. If there is no positive news flow, expect markets to weaken into expiry after our four-week uptrend.

Great going
TCS announced excellent numbers and the street responded with a thumbs up to the same. The share recorded sharp gains of Rs 215 for the day. The gains for the week were Rs 255.40 or 7.5 per cent. The market cap of the company is fast approaching the 100-billion-dollar mark. This would be the first company to achieve the same. Had it not been for the sharp rupee depreciation last week, TCS would have achieved the mark last week itself.

A lull
Speaking about TCS and Infosys, the gap between the valuations has increased significantly. While TCS trades at 26.78 times, its twelve months EPS of Rs 127.03, Infosys trades at 15.93 times its EPS of Rs 73.97. This difference is on account of superior growth, expected earnings and the confidence of the management. There was no news on the primary market with no new issues or roadshows. Probably there is a lull and it may take some time before issues return to the primary market.

Stellar gains
Mishra Dhatu Nigam Limited a public sector company listed on April 4 has shown spectacular performance so far. Shares were issued at Rs 90 and closed at Rs 170.85. The gain during the week was Rs 59.75 or 53.78 per cent. The gain since listing was even more spectacular at Rs 80.85 or 89.83 per cent. Seldom has one associated such a performance with the public sector and even the private sector has not seen such gains on a regular basis. What has happened is indeed intriguing and upper circuits have become quite a norm in this company.

Pressure points
With expiry in the coming week and four consecutive weekly gains, market is likely to be under pressure. Take some money off the table after a successful uptrend and wait for the correction before re-entering the markets. Result season has just begun and its very early days as yet. Be patient. Everyone's time will come.

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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