It's a volatile market, trade cautiously

The government has imposed a fine of $1.55 billion on Reliance Industries, headed by Mukesh Ambani, and its partners for ‘stealing' gas from ONGC wells. The company would contest the demand but the share price is likely to be under pressure. File pic

The markets were under pressure last week, particularly the midcap and smallcap space. The fall in indices of this space does not reflect the damage that has actually happened. Just the other day, everyone was recommending stocks from the midcap and smallcap space and suddenly, one saw that these shares were just not saleable. Double-digit losses were the order of the day.

The BSE Sensex lost 667.36 points or 2.39% to close at 27,274.15 points. Nifty lost 204.25 points or 2.36% to close at 8,433.75 points. The broader indices like the BSE100, BSE200 and BSE500 lost 2.69%, 2.82% and 2.94% respectively. BSE Midcap lost 4.24% while BSE Smallcap lost 4.29%. In sectoral gainers, there were none, but the sector which lost the least was BSE FMCG, losing a mere 0.09%. The top sectoral loser was BSE Healthcare down a massive 7.47% followed by BSE Realty 6.16% and BSE Oil and Gas 4.93%.

In individual gainers, Cairn India was up 4.71% followed by ITC 2.70% and Hindustan Unilver 1.10%. The losers were led by Sun Pharma down 12.23% followed by Dr Reddy 8.42%. The PSU banks were under pressure after NPAs continued to haunt their performance. PNB was down 8.98% followed by Bank of Baroda 8.60% and Union Bank 8.55%.

Who will America choose?
The week was full of news and a lot would happen in the coming week. Markets were weak on the outcome of the US elections. With a straight contest which is likely to go down to the wire there has to be one winner. Who would it be and who would be better for the US is highly debatable.

One thing however is certain that the country has never before been so divided over elections and wounds may not heal in a long time to come. Markets around the globe were under pressure when it appeared that Donald Trump had established a lead. The lead since then has decreased and is currently neck-to-neck. By Wednesday it would be clear who has won or lost. Till then, markets and even afterwards would be volatile.

The Fed however, in their meeting kept interest rates unchanged and left the December meeting as the one where probably they would take action and raise rates.

Fine on Reliance
The government has imposed a fine of $1.55 billion on Reliance and its partners for ‘stealing' gas from ONGC wells. The company would contest the demand but the share price is likely to be under pressure.

GST Council has announced rates for GST. There would be four rates at 5%, 12%, 18% and 28%. Half the items in the basket of consumer index would be at 0% so that inflation could be kept under check. The 28% rate would also have a cess for luxury goods and sin goods. The rate for gold has not been announced and would be done later in the month.

Tata-Mistry saga continues
The Cyrus Mistry-Ratan Tata saga is likely to be a prolonged matter with the Indian Hotels directors approving the chairmanship of Cyrus Mistry. Three of Tata group companies would be meeting for quarterly results this week. The spat is becoming uglier, and is sending wrong signals to investors.

Mallya's unsettled dues
Two courts have issued non-bailable warrants against Vijay Mallya. The signal being sent out is that dues would have to be settled and leaving the country would not be a solution.

Results from companies in the July-September quarter have not provided the boost that was being expected. The PSU banks have reported poor results and the turnaround is yet to happen. While the slippages seem to be getting arrested the uptick could be a couple of quarters away. It is this expectation, which has generated interest amongst investors looking at entering the PSU Banking space.

Two issues would be listing this week on Monday and Tuesday. On Monday shares of PNB Housing, which was very well received by investors, would make their debut. There is a premium on the shares being quoted and the same would reflect in prices. The second issue is from Varun Beverages, which would list on Tuesday. This issue was subscribed only by QIB's and the other three buckets of HNI's, retail and employees remained under subscribed. People apparently did not like the valuations at which the shares were offered.

With markets falling continuously from ‘Muhurat trading' a technical bounce is on the cards. It however would only be a bounce and should be used for exiting positions. One should wait for better opportunities to enter the market.
Volatility would be the order of the day. Trade cautiously.

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.