07 February,2011 07:32 AM IST | | Arun Kejriwal and Alex K Mathews
Several companies are having a torrid time at the bourses
Last week was topsy-turvy for the markets but the BSE SENSEX managed to hold on to the 18K level by the skin of its teeth. Last Friday, the last day of trading, saw the index break the level intraday and make a low of 17.926 points, which is a significant event.
A supporter of embattled Egyptian president Hosni Mubarak rides a camel through the melee during a clash between pro-Mubarak and anti-government protesters in Tahrir Square in Cairo, Egypt
The NSE NIFTY broke the 5400 point level and this was the second consecutive week of loss, for the benchmark indices. The BSE SENSEX lost 387.82 points or 2.15 per cent to close at 18,008.15 points for the week. The NSE NIFTY lost 116.40 points or 2.16 per cent to close at 5,395.75 points.
Lost
The broader indices like the BSE 500, BSE 200 and BSE 100 lost between 2.02 and 2.03 per cent, while the BSE MIDCAP lost 2.43 per cent and the BSE SMALLCAP lost 2.58 per cent.
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The big loser for the week was BSEu00a0 FMCG, which lost a staggering 220.77 points or 6.87 per cent to close at 3214.30 points.
A big contributor to this fall was ITC, which lost Rs 15.40 or 10.07 per cent to close at Rs 152.90. The BSE IT
was another loser with a weekly loss of 3.21per cent at 6,258.5 points.
Torrid
BSE REALTY continues to be a loser and within the space two companies in particular are having a torrid time at the bourses. DB Realty lost Rs 10.10 or 7.22 per cent to close at Rs 139.85 while Unitech lost Rs 7.95 or 18.45 per cent to close at Rs 43.10.
These companies were allotted telecom licenses and have then sold a large part of the stake to foreign companies like Etisalat and Telenor respectively, at huge profits. These companies have been called for interrogation and the shares are likely to be under pressure going forward.
Panic
There was virtually no news on the IPO front except the fact that Tata Steel shares post the FPO have been listed and held ground on a weekly basis. There are no issues planned in the immediate future and probably the first issue could be from the Government itself.
The markets are being driven by panic and there is complete confusion currently. The good thing is that selling by foreign institutional investors has not only stopped but they have actually turned buyers in the last two days.
One hopes this is not an aberration and this becomes a trend. International news led by Egypt and local news led by 2G scam, inflation and muted attempts by various politicians and government officials to justify the same are affecting the markets. This is likely to continue for some time.
Impasse
There is a meeting between various political parties on Monday (today) to decide on the parliament impasse. I believe with the former telecom minister in CBI custody, the possibility of a JPC being instituted becomes quite likely and in the interest of democracy.
Assuming something like this happens, there is a strong possibility that markets could rise during the week and also provide a technical rally. Markets are currently oversold and a relief rally is certainly overdue and has to happen any time soon.
Markets look weak and may fall further but falling from here without recovering first look improbable. I would bet on a weak first day and either improving towards the end of Monday itself or a strong Tuesday.
Resistance
The BSE SENSEX has support at 17,726 points then at 17,356 points, then at 17,160 points and finally just below the 17K level at 16,969 points. It has resistance at 18,391 points, then at 18,542 points, then at 18,735 points, then at 18,904 points and finally at 19,006 points.
The NSE NIFTY has support at 5,324 points, then at 5,235 points, then at 5,185 points, then at 5,112 points and finally at 5,085 points. The resistance is at 5,511 points, then at 5,556 points, then at 5,605 points, then at 5,698 points and finally at 5,735 points.
Fishing
The week beginning Monday February 7u00a0 will be extremely volatile and would see huge intraday price movements. I believe, looking at the market technicals, the current political scenario that the market is likely to move up after some initial weakness.
Investors could do some bottom fishing with strict stop losses and look to make 10 per cent to 14 per cent on the upside in the short term. Traders should play the market from both sides but carrying forward shorts at the end of the day is likely to be dangerous.
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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.
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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.
As Egypt burns, pressure grows on economies
It was a volatile week, with the markets witnessing mixed trends. There were no major gains made during last week, even though we saw many wild swings. Economic data from around the world was supporting the gains made in the global markets.
The rise in energy prices due to growing unrest in Egypt kept nullifying the positives. Also from the middle of this week, markets in China and Korea are shut on the back of the Lunar New Year holiday. So, cues from Japan and Australia were dominating the Asian front.
The beginning of last week was positive with the GDP growth for the 2009/10 fiscal year provisionally revised to 8 per cent from 7.4 per cent.
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We also saw renewed buying in banking space, fuelled by rumours that the Finance Ministry is expected to seek cabinet approval to a proposal for giving proportionate voting rights to promoters of private sector banks.
The country's trade deficit narrowed to $2.6 billion compared with $8.9 billion in November, with HSBC Purchasing Managers Index rising in a slow pace.
The issue of Egypt is gaining strength by the day and is putting pressure on economies which are trying hard to tame their inflation, due to rising fuel prices. Also, the fear of political contagion will keep the Middle East space active, which controls the major supply of oil.
Anti-government protestors (front) clash with supporters of President Mubarak in Cairo, Egypt
On the Asian side, Australia woke up from the worst flood in history to the deadliest cyclone Yasi which hit the country last Wednesday.
Further the meteorological department has issued warnings of flash floods in areas like Cairns and Townsville. This cyclone has left 75 per cent of the banana crop damaged and consumers are likely to pay around $13 per kg for banana while the sugar industry loss counts up to $500 million.
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Sugar prices climbed considerably last week, on the back of price rise due to supply contraction expected worldwide, as Australia is the third largest exporter of sugar. One thing one should keep in mind is that domestic sugar companies will benefit marginally from the rise in global price, as our sugar exports are restricted.
Economic data from around the world was encouraging with the German unemployment rate at 7.4 per cent against 7.5 per cent, the US non-farm employment change declined to 1,87,000 from 2,47,000 while the New Zealand unemployment rate rose to 6.8 per cent against 6.4 percent.
But the US initial jobless claims declined to 4,15,000 from 4,57,000 and these employment data from around the world is indicating that the overall employment markets is showing a revival trend.
Commodity space was active throughout the week, with metal and crude leading in front. Both precious and base metals saw smart run ups, with gold prices above $1350. As manufacturing activity across the globe rushed up, the expected rise in demand helped base metals to gain with copper leading the race.
Sterlite industries gained around 8 per cent during last week and it has further potential to move up towards 185 levels in the short term.
Floods in Malaysia have caused supply disruption as the palm estates are under water and the government is meeting to decide whether it wants extra 50000 tonnes to 100000 tonnes of crude palm to meet its domestic supply shortage.
Our palm oil producers like KS Oil, Ruchi Soya etc are expected to get benefit out of this supply shortage.u00a0u00a0 Crude oil is gaining further upward momentum and is likely to test 93.55 in the short term.u00a0 Gold is having support at $ 1342 and $ 1326.u00a0 Major target for the gold will be at $ 1375.
Nifty closed with a loss last week, and still has major support at 5,348. FII activities were evident and they were seen exiting stocks at every rally. The markets lack a reliable trend as gains made in one day are drained away the other day.
So, investors should be cautious while purchasing stocks in bulk quantities and should adopt an inverted pyramid buying strategy with a medium term perspective.u00a0 Buying Nifty 5400 call options and putting options together is advisable, because increase in volatility will give decent returns to the investor.
Alex K Mathews is the author of Financial Services And Systems, as well as Option Trading: Bear Market Strategies published by Tata McGraw Hill. He is also the technical and derivatives research head of Geojit BNP Paribas Financial Services Ltd.
The author may have a vested interest in investments he has recommended. 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.
