21 March,2011 07:14 AM IST | | Arun Kejriwal and Alex K Mathews
While global markets were hit by the crisis in Japan, Indian markets remained largely unaffected
Japan had one of the worst tsunami and earthquakes that one is aware of in recent times. It hit the Japanese markets and also had a devastating effect on the world markets.
A man walks through a region ravaged by the tsunami in Japan
The large amount that the Japanese Central Bank has poured into the economy for reconstruction had a big effect on the Japanese Yen, which gained very sharply against the US Dollar in particular.
The G7 decided on a concerted effort and sold Japanese Yen, which weakened the currency to some extent. The Nikkei, which is the Japanese benchmark index after falling sharply for the first few days, recovered and is likely to continue its recovery going forward.
Expectations
Coming to our markets, contrary to expectations the markets actually gained on Monday and seesawed with losses and gains on every consecutive day. It is only on Friday that we again lost making it three losing days and two winning days. The volatility has been very high and we had more than one per cent gains or losses on every single day for the week. The BSE Sensex lost 295.28 points or 1.62 per cent to close at 17,878.81 points. The NSE Nifty lost 71.75 points or 1.32 per cent to close at 5,370.70 points. The broader indices like the BSE500, BSE200 and BSE100 lost 1.03 per cent, 1.13 per cent and 1.20 per cent respectively. The BSE smallcap lost 1.29 per cent but the BSE midcap performed much better and lost a mere 0.30 per cent. The credit policy announced by the Reserve Bank of India was in line with market expectations and the BSE Bankex closed virtually flat losing a mere 0.07 per cent.
Caution
There is one IPO opening on Tuesday in the coming week. Shilpi Cable Technologies Limited opens its issue on Tuesday and closes on Friday and would be raising Rs 55.87 crores in a price band of Rs 65-69. There is not much to talk about this company and therefore they have chosen not to have even a road show for the issue in Mumbai. Though the last three issues, which did not have fundamentals, are doing well in the market, one must resist the temptation of such issues. I believe people should simply avoid the issue. SBI had issued bonds in the last week of February 2011 and the allotment of these bonds has been completed. These bonds are likely to list in the current week and retail investors who have applied for the same would make good returns in the issue.
Volatile
The week ahead would continue to see extreme volatility as has become the norm. The BSE Sensex has support at 17,732, then at 17,664, then at 17,469, then at 17,322 and finally at 17,295 points. It has resistance at 18,142, then at 18,278, then at 18,463, and finally at 18,583 points. The NSE Nifty has support at 5,314, then at 5,232, then at 5,206 and finally at 5,143 points. The resistance is at 5,435, then at 5,485, then at 5,537 then at 5,565 and finally at 5,656 points.
Positive
It appears the markets are likely to be fairly range bound on a net basis for the week and would not move much on a net basis. It however appears that the markets are likely to end the week on a small positive note and the banking sector looks attractive. Readers would recall that the government of India is pumping in money into the equity of public sector banks and helping them to become stronger in terms of their capital adequacy norms. In conclusion a more sedate week with banking stocks and the mid cap sector likely to be positive during the week. I believe that the fall in volumes and Foreign Institutional Investors (FIIs)turning net sellers once again will keep the pressure on the markets.
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
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 isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
Ripple effect
Global and domestic events gave a mixed trend for the market this week. Crude prices slipped below $100 towards $97 early in the week but later towards the end of the week it climbed back to $103. Earthquake measuring 9.0 on Richter scale, which hit Japan followed by a massive tsunami, resulted in the loss of around 10,000 lives and roughly calculated loss of around $180 billion.
u00a0
The aftershock of this disaster had a ripple effect around the world with global markets going for a toss. Asian markets especially slipped drastically, as tsunami devastated Japan to a great extent. Nikkei fell around 20 per cent this week while Dow Jones fell around 6 per cent.
Our markets were quite insulated to this event, though minor shocks were felt. The geo-political tensions will keep the Indian market nervous because the indices are already trading below its crucial support level of 5620 and 5400.u00a0 The immediate support for the Nifty will be at 5300 and 5200.
Our markets got support from the better than expected advance tax numbers which came out this week. Among them Reliance paid 36.88 per cent higher than its previous years payment while Tata Steel paid 92.4 per cent, Piramal Healthcare paid 3877.27 per cent, HDFC Bank paid 80 per cent, ICICI Bank, Citibank and HSBC paid 35.71 per cent, 200 per cent and 136.32 per cent respectively. Financial companies, especially foreign banks drew the tax growth picture in the fourth quarter.u00a0
During the week, RBI announced a hike in repo and reverse repo rate by a quarter percentages and left the Cash Reserve Ratio (CRR) unchanged which was actually in-line with the market expectation.u00a0 IDBI Bank can be bought below Rs 128 with a medium to long term perspective.u00a0 After correction it can move well beyond Rs 168.
Stock specific movements were seen in Reliance which fell below the Rs 1028 mark on Friday due to reports that the company responded to the oil regulator's query that gas output from its KG Basin block could be lower than the estimated figure.u00a0
It will have major support at Rs 973.u00a0Tata coffee, which started its journey from around 585 this month, made almost 90 per cent jump and crossed above the 1000 mark.
But the global scenario was cloudy with fear over the radiation leaks in Japan. Selling pressure seen in crude price was due to the fact that Japan being the third largest economy in the world will now consume less oil. Metals too dipped in the early days of the week but recovered towards the end of the week.
Libyan crisis, which was ignored for the time being, after the crisis in Japan, hit the headlines when the UN sanctioned a no fly zone over Libya. This has taken crude back to its high levels on Friday.
Global economic data was a mixed bag. On the European front, the German ZEW economic sentiment declined to 14.1 against 15.7 and the employment change rose to 0.1 per cent. On the positive side, the US initial jobless claims declined to 385000 from 401000 and the CPI rose to 0.5 per cent against 0.4 per cent.
Also the Philadelphia Fed Manufacturing Index was at 43.4 against 35.9.u00a0 IT stocks, like Infosys and TCS, are looking weak, of which Infosys lost its key support at the 200 Day Moving Average and is likely to fall further.u00a0 On the other hand TCS has immediate last support at Rs 1058.
Gold got very strong support at $ 1390 and is likely to test $ 1418 and $ 1439.u00a0 Silver too can move towards $35.20 and $ 36.75.u00a0 Support for silver will be at $ 33.45. Low-level value buying can be considered on Gravita at around Rs 282 for a target price of Rs 319.
The author may have a vested interest in investments he has recommended. Feel free to e-mail him at alex@geojit.com. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
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 isu00a0 for educational and information purposes only and under no circumstances should be used for actual trading or making investment decisions.
Readers must consult a qualified financial advisor prior to making any actual investment or trading decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at his or her risk.
