Survive and thrive

With sharp gains witnessed in midcap and smallcap stocks, the markets are relatively upbeat. This week therefore becomes very crucial for the markets. The rally and momentum need to sustain for the recovery to happen

Last week ended with Friday the 13th adding steam to the momentum of the Tuesday rally. The BSESENSEX gained 305.82 points or 1.93 per cent to close at 16,154.62 points. The NSENIFTY gained more at 119.10 points or 2.51 per cent to close at 4,866 points. The broader indices gained even more with the BSE100, BSE200 and BSE500 gaining 3.02 per cent, 3.26 per cent and 3.44 per cent respectively. The BSEMIDCAP and BSESMALLCAP were bigger gainers at 5.37 per cent and 7.12 per cent. After a very long time we have seen that the breadth of the market had improved significantly. This brings some good news for retail investors, who finally have a reason to cheer.



Results
Infosys declared excellent results for the December quarter, which was better than what the street expected. The difference was the guidance in dollar revenues for the current quarter ending March 2012, which did not show a significant gain over the previous year. This spooked the markets and the stock and Infosys lost Rs 252 or 8.8 per cent to close at Rs 2,586. This performance and guidance brought down the BSEIT index 6.88 per cent and competitor TCS down 7.24 per cent.

The other big gainers were BSEMETAL (up 9.84 per cent), BSECAPITAL (up 8.49 per cent) and BSEBANKEX (up 6.14 per cent). The star was BSEREALTY, which gained a staggering 13.10 per cent led by DLFu00a0 and HDIL. In the metal pack almost everybody chipped in with big gains with Tata steel up 14.58 per cent, Hindalco up 12.93 per cent, JSW Steel 12.06 per cent and Sterlite 9.59 per cent. Axis Bank gained 10.33 per cent, SBI gained 6.41 per cent and ICICI bank gained 6.04 per cent.

Investment
FIIs continued to be buyers during the previous week with net purchases of Rs 1,733 crore while domestic institutions sold shares worth Rs 1,613 crore. After the closure of the European markets last Friday, Standard and Poor's downgraded nine out of 17 European nations including France, Italy and Spain. The same was in the offing for a long time, but the cumulative impact is likely to have some bearing on markets this week.
SEBI and RBI have released the details for investments by Qualified Foreign Investors (QFIs) and have put at rest all doubts about unaccounted money flowing into the country. The guidelines are quite rigid and tedious and only serious investors would opt for investment through this route. All trades by QFIs would be settled on a gross basis. This means that effectively each trade has to result in delivery.

Fruits and vegetables have become cheaper and helped in bringing down inflation. Goodwill Hospital IPO, which had opened on December 30 was a complete disaster and had to be withdrawn. The issue received bids for a mere 21.045 shares, which was 0.62 per cent of the IPO size. UTV Software Communications open offer for delisting, opens and closes during the week. Walt Disney has offered to buy all the shares from the non-promoter shareholders at a price to be determined by reverse book building. The floor price is Rs 835.03 and the board of directors of the acquirer has approved a price of Rs 1,000 per share.

There is a pre-condition that this price or any higher price, which would be accepted by Walt Disney, stipulates that a minimum of 81,39,051 shares of the total public shareholding of 1,22,15,776 shares must be offered and accepted. There is a very strong rumour in the market that with the rupee depreciation a price of Rs 1,200 per share may be accepted by the acquirer. There is a view-point from the acquirer as the Indian company does not have dollar revenues, this logic may not hold true. It's an interesting situation and a tricky call with the present price trading at Rs 1,035.55. Shareholders are advised to take an informed call.

Action
Results will continue to dominate action in the market besides overseas cues. The Indian rupee strengthened during the previous week closing at Rs 51.52 up from the Rs 52.72 previous weekend.

The markets have gained for the last two weeks . The mood has also begun to change with sharp gains witnessed in midcap and smallcap stocks.

This week therefore becomes very crucial for the markets and the rally and momentum need to sustain for the recovery to happen. The market runs into resistance and needs to atleast sustain itself above the 4,800 mark on the NIFTY and 16K mark on the SENSEX.

The BSESENSEX has support at 16,050 points, then at 15,911 points, then at 15,802 points, then at 15,485 points and finally at 15,223 points. It has resistance at 16,258 points, then at 16,382 points, then at 16,465 points, then at 16,549 points and finally at 16,754 points. The NSENIFTY has support at 4,833 points, then at 4,745 points, then at 4,695 points, then at 4,605 points and finally at 4,555 points.

It has resistance at 4,898 points, then at 4,945 points, then at 4,988 points, then at 5,045 points and finally at 5,099 points. It is likely to be a more range bound week this time and the rally needs to sustain to signal any meaningful recovery going forward.

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

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