Take a chill pill

Going strong are the two words we can use to describe the current momentum. You need to relax just before the new financial year fireworks begin

Professionals work on the floor of the New York Stock Exchange (NYSE). The Dow Jones industrial index notched its sixth-straight positive quarter, marking the best run for the Dow since 2006. Pic/GETTY IMAGES

Markets ended the week on a positive note. The BSESENSEX gained 199.10 points or 0.68 per cent to close at 29,620.50 points. NIFTY gained 65.75 points or 0.72 per cent to close at 9,173.75 points. The broader markets saw the BSE100, BSE200 and BSE500 gain 0.81 per cent, 0.96 per cent and 1.17 per cent respectively. BSEMIDCAP gained 1.79 per cent while BSESMALLCAP was up 2.53 per cent. In sectoral gainers, the top performer was BSECONDUR up 5.48 per cent followed by BSECAPGOOD 2.26 per cent and BSEPOWER 1.75 per cent. On the losing side were BSEIT down 0.70 per cent followed by BSEMETAL 0.46 per cent and BSEHEALTHCARE 0.29 per cent.

Finance Minister Arun Jaitley (r) and MoS SS Ahluwalia at Parliament in New Delhi on Friday during the Budget session. Pic/PTI

Rah rah for the rupee
In individual stocks, the top gainer was State Bank of India (SBI)âu00c2u0080u00c2u0088up 6 per cent followed by some of the other PSU Banks like PNB 6.65 per cent, Canara Bank 3.25 per cent and Bank of Baroda 2.31 per cent. The losers were led by Idea Cellular down 5.67 per cent followed by Hero Moto 4.52 per cent.

The Dow Jones gained 66.50 points or 0.32 per cent to close at 20,663.22 points. The Indian Rupee continued its strong showing and gained 56 paisa or 0.86 per cent to close at Rs 64.85.

With the end of last week, the financial year 2016-2017 has also come to an end and it has been satisfactory from the stock market perspective. The BSESENSEX ended the year with gains of 4,279 points or 16.88 per cent for the year at 2,962.50 points. Of this, as much as 2,994 points or 11.24 per cent was in the last quarter of the financial year. Similarly NIFTY ended the year with gains 1.75,435 points or 18.54 per cent to end the year at 9173.75 points. Of this, 988 points or 12.07 per cent was in the last quarter. FII flows too were positive and there were aggressive buyers in March investing Rs 30,000 crore and about Rs 50,000 in the financial year.

A look at share fare
Shares of CL Educate Limited debuted on Friday, on the bourse and had a very poor showing. Their performance was on expected lines. The company had a simultaneous fresh issue for 21.80 lakh shares and an offer for sale of 25.80 lakh shares in a price band of Rs 500-502. The discovered price was R 398 on the BSE and Rs 402 on the NSE.

The share then recovered some lost ground and closed at the 5 per cent upper circuit at R 417.90 on BSE and Rs 422.10 on the NSE, with losses of 16.75 per cent and 15.92 per cent respectively. What is damaging for the company at this point of time is the extremely poor volume which saw a mere 3.67 per cent of the IPO size being traded on day one.

Normally, the volume on listing day is the highest and then the same reduces. It surely will take a long time before shares bought by investors change hands.
Nifty futures for March expired on a positive note gaining 234.25 points or 2.62 per cent for the series to expire at 9,173.75 points. They remained unchanged on the last trading day of the week as well.

A couple of issues
The week ahead has a trading holiday on Tuesday on account of Ramnavmi. On Wednesday and Thursday, the Reserve Bank of India (RBI) would be meeting for its policy review.

Rates are expected to remain unchanged even though the headline inflation number is under control.

Considering the fact that rates in the US are likely to be raised going forward, the RBI would certainly not want to reduce the interest rate differential between India and the US and cause a flight of money invested in debt market here. They would therefore be quite happy keeping rate unchanged.

The primary markets are quite buoyant these days and there are a host of issues lined up for tapping the markets mid-April onwards. While the mood is optimistic, one should be cautious about the valuations that these issues command. A couple of more issues like the education company which listed last week with losses on day one, would puncture the sentiment in the market and make things for new issues that much more difficult.

So much liquidity
There is too much of liquidity in the market and even though valuations are currently rich, there is support at lower levels. On every correction there are investors waiting to lap up shares. In such an environment, it is difficult to envisage any meaningful correction until it is news driven.

The budget has been passed and so has GST. The states need to pass matching bills so that the roll out happens as planned, on July 1. The kind of FII flows that we have seen in March which happened after election results to five states were announced, is indicative of the support that the central government enjoys. The belief is that reforms would pick pace and the country would register strong progress on various fronts. This is the big driver for the markets and liquidity.

The week ahead with a holiday and RBI widely expected to keep rates unchanged, should be a quiet one. Relax and wait for markets to settle down in the new financial year, before any fireworks begin.

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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