16 August,2011 10:46 AM IST | | Arun Kejriwal
Concerns about the health of the economy prevail
The markets continued to fall and have now fallen for the past three consecutive weeks. The fall has been less this week compared to previously, but the concerns about the health of the economy of some countries in Europe and that of the USA continue. The BSE SENSEX lost 466.24 points or 2.69 per cent to close at 16,839.63 points, its lowest close in the last 15 months. The NSE NIFTY lost 138.30 points or 2.65 per cent to close at 5,072.95 points.
Illustration/ Jishu
The broader markets in line with the benchmark indices also lost ground. The BSE100, BSE200 and BSE500 lost 2.49 per cent, 2.40 per cent and 2.34 per cent. The BSE SMALLCAP lost 2.48 per cent while the BSE MIDCAP was far better in comparison losing a mere 1.14 per cent. In individual stocks, TCS and Infosys were big losers with TCS losing 105.50 or 9.98 per cent to close at Rs 951.20. Infosys too, was a big loser with losses of Rs 217 or 8.38 per cent to close at Rs 2,374. The BSE IT index lost a staggering 454.32 points or 8.32 per cent to close at 5,004.7 points.
Worries
The BSE SENSEX has now lost 2,104.97 points from the intra-day high of 18,944.60 points made on July 26 to Friday, August 12 close of 16,839.63 points. This fall could be attributed to a number of reasons, which include global cues and economic uncertainty, poor performance of the corporate sector and results for Q1 being below the mark, rising interest rates and unabated inflation and also a worry that things seem to be slowing down.u00a0
To add to this list, is the fact that FIIs on whose inflow the markets depend on their performance have turned net sellers in the last few weeks. The sharp fall in our markets has, to some extent, been reduced by some aggressive buying by domestic insurance companies led by LIC.
The highly successful offering from L&T Finance Holdings, which had received excellent response from retail investors and shareholders of the parent listed on Friday. The performance was poor and reflects the sad state of affairs in the market place. The share, which was issued in a price band of Rs 51-59 and priced at almost the lowest level at Rs 52, closed trading on the listing day at Rs 49.95, a net loss of Rs 2.05 or 3.94 per cent.u00a0u00a0
Subscriptions
The IPO for the week, was from Tree House Education which had a price band of Rs 132-153 with a discount of Rs 6 to retail applicants. The IPO just about managed to get subscribed with an overall subscription of 1.85 times, led largely by the retail portion, which was subscribed 2.76 times. The anchor book was subscribed at Rs 132, which indicates the poor state of the market. This issue would be priced at the lower end of the band and is likely to be under pressure on listing because retail would be getting shares at a discount of Rs 6 per share.u00a0
The bond market seems to be doing far better and the offering from Shriram City Union was subscribed on day one. This week will see yet another bond issue from Mannapauram, which is offering its bonds for two a duration of 400 days and 2 years respectively. The coupon rate for the 750-crore issue is 12 per cent for 400 days and 12.2 per cent for two years. Being short term in nature, these bonds would be compared with fixed deposits and are likely to get subscribed on day one itself. All these bond issues are on first come first served basis.u00a0
Vulnerable
The markets are looking vulnerable currently and seem to be lacking support. Investors have not only turned cautious but are now waiting on the side lines because of the belief that the worst is not over and the crisis in Europe and the US is far from over. In such a scenario, though the fall of the markets may be arrested, the recovery is far from happening and is unlikely to happen quickly, which means that the recovery even when it does happen would be slow and fairly laboured at that.
The BSE SENSEX has left a downward gap when it fell sharply on Friday, August 5. The gap between 17,664 and 17,358 has not been breached in the last five trading sessions. Similarly, the NIFTY has a gap between 5,323.15 and 5,229.65 points. This gap would act as a very strong resistance as we move forward and every passing day without the level being breached, would make the resistance stronger.
Recover
In the coming weeks, markets are likely to be range bound and may recover towards the end of the week. The BSE SENSEX has support at 16,667, then at 16,428, then at 16,205 and finally at 15,960 points. It has resistance at 17,129, then at 17,253, then at 17,591, then at 17,864 and finally at 18,077 points. The NSE NIFTY has support at 5,019, then at 4,944, then at 4,878, then at 4,785 and finally at 4,755 points. It has resistance at 5,160, then at 5,202, then at 5,301, then at 5,355 and finally at 5,460 points. Any sharp dips may be used for making selective and small purchases. Caution would however continue to be the buzzword.u00a0
