07 March,2011 07:51 AM IST | | Arun Kejriwal
After a spectacular rally, the week ahead is likely to see some consolidation
Last week saw the Union budget being presented on the very first day of the trading week. There was huge volatility with the BSE Sensex making an intraday high of 18,296 before closing at 17,823 points. But the fall from the high was huge and showed the confusion after the presentation of the budget.
Illustration/Jishu Dev Malakar
The following day confidence was restored when the Sensex gained 623 points. The week ended with the Sensex closing at 18,486.45, a weekly gain of 785.54 points or 4.44 per cent. The NSE Nifty closed with a gain of 235.20 points or 4.43 per cent at 5,538.75 points.
Performer
The other indices like the BSE500, BSE200, and BSE100 saw gains of 4.09 percent, 4.19 per cent and 4.21 per cent. The BSE midcap gained 3.76 per cent while the BSE smallcap gained 2.69 per cent. The star sector performer was the BSE FMCG, which gained 6.79 per cent, helped by ITC, which gained a staggering Rs 16.35 or 10.47 per cent for the week. No new excise duty was levied on cigarettes this time, which led to the rally.
EyeWash
The budget was by and large a non-event and the fact that the excise duties were not rolled back led to the smart rally. The Finance Minister announced that salaried taxpayers would not have to file their I-T returns if they have no other source of income. This is eyewash as all salary cheques are deposited in a bank account and would earn some interest, which is taxable. The provision for subsidies on account of petroleum products, fertilisers and food seems substantially on the lower side and the provision would need to be increased. Secondly the government is very hopeful of robust tax collections which looks difficult as margins of companies are under pressure and may be difficult to achieve. Elections in five states are due in the next two months and have forced the government to defer many important decisions, which would not appear to be populist in nature.
The roadmap to General Sales Tax (GST) has been spelt out and it appears that the same would certainly happen in 2013 if not 2012. The crisis in MENA (Middle East and North Africa) seems to be unending and is having a big effect on crude oil prices which are already on a boil and at a 30 month high.
New issues
In the primary market we have a new issue opening on Tuesday from Lovable Lingerie Limited, which manufactures undergarments for women under the brand names Lovable and Daisy Dee. The shares are being offered in a price band of Rs 195-205. The company had a turnover of Rs 88.05 crores for the nine months ended December 2010 and a net profit of Rs 12.61 crores. The Earnings Per Share (EPS) on a fully diluted and annualised basis is Rs 10 per share.
The shares are being offered at a price earnings multiple of between 19.5 and 20.5 times, which is certainly not cheap. The market leader in the undergarments business is Page Industries, which is trading at 28 times. Page Industries had a turnover of Rs 380 crores in nine months of the current year compared to Lovable Lingerie turnover of Rs 88 crores. The issue is expensive, but there is likely to be listing gains, as there is a lot of speculation about the issue.
Future
The week ahead is likely to see some consolidation after a spectacular rally last week. The BSE Sensex has support at 18,377, then at 18,089, then at 17,891 and finally at 17,559. It has resistance at 18,666, then at 18,739, than at 19,167, then at 19,340 and finally at 19,770 points. The NSE Nifty has support at 5,505, then at 5,421, then at 5,362 and finally at 5,232. The resistance for NSE Nifty is at 5,608, then at 5,672, then at 5,726, then at 5,801 and finally at 5,907 points. The volatility seen in the markets is unlikely to reduce and the lower volumes witnessed on Friday are a cause for concern.
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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