A new high, few lows

The year 2012 ended on a slightly weak note and the first four trading days of 2013 were all positive. The last week ended saw the SENSEX gaining 303.60 points or 1.56 per cent to close at 19,748.08 points. The NIFTY gained 107.80 points or 1.82 per cent to close at 6,016.15 points.

Washington DC, USA: US Senator Ben Cardin, D-MD, (l) participates in a reenacted swearing-in with US Vice President Joe Biden in the Old Senate Chamber at the US Capitol. The 113th US Congress, featuring dozens of new faces in the House and Senate, convened fresh from the year-end 'fiscal cliff' fiasco, as lawmakers cast a wary eye towards the tough budget battles ahead. Pics/AFP

The broader indices like the BSE100, BSE200 and BSE500 gained more at 2.05 per cent, 2.20 per cent and 2.25 per cent respectively. The BSE MIDCAP and BSE SMALLCAP were big gainers with gains of 3.12 per cent and 3.72 per cent respectively.

In sectoral indices, the gainers were BSE REALTY up 5.19 per cent, BSE PSU up 4.20 per cent and BSE OIL up 4.06 per cent. BSE FMCG was a loser down 0.86 per cent. In individual stocks, IFCI was a big gainer up 15.26 per cent after the government superseded the board of directors. The other gainers were Tata Coffee up 12.41 per cent, REC up 9.63 per cent, Jet Airways 7.99 per cent, PNB 7.58 per cent and HPCL up 7.17 per cent. The losers included ITC down 2.33 per cent and NMDC down 0.40 per cent.

Sharp Rise
The year began well and talks about diesel price hike in a phased manner of R1 per litre saw the oil marketing companies' share prices rise. Along with them, ONGC also saw a sharp rise as it shares a subsidy of over 38 per cent of the total under recoveries on the petro prices. This week would see Infosys declaring its results on Friday, January 11, and kick off the result season for the October-December 2012 quarter. The year 2012 has not been a great one for Infosys and its share prices on an annual basis were down over 16 per cent when the SENSEX as a whole rose over 25.7 per cent. The share has been under tremendous pressure and results would be keenly watched to see whether there is any turnaround story in the results or not. The Indian Rupee depreciated during last week to close at 55.07. The mainstay and the biggest driver of 2012's rally have been the investments made by FIIs. They have poured R1,30,000 crore in the calendar year 2012 while domestic institutions have sold worth Rs 21,000 crore. In the week under review, FIIs have invested R5,685 crore, while domestic institutions have sold Rs 1,238 crore.

New High
The markets are at a new high and are trading at levels last seen in January 2011. The all-time high was made in January 2008 and talks have begun of reaching that level in the near future. The fiscal deficit which was announced for the period April-November 2012 is at 80 per cent of the annual deficit and indicates that at the current rate, the year's deficit would be in the region of 1.2-1.3 times the budgeted amount. The situation is not too good but the mood in the market based on FII inflows seems to be turning positive. With the midcap and smallcap sectors playing catch up, it is possible that the retail investor may have something to cheer up with and then the real danger of markets turning euphoric may happen. One must remember that so far retail investors have been reluctant to participate in rallies in the stock market. The US senate was able to cobble together some sort of arrangement and avoid the ‘Fiscal Cliff'. The markets heaved a sigh of relief and it helped global markets to also gain on the resolution of this issue. What still remains to be seen is whether the infusion of money through buyback of bonds would continue or not and if not, how it would affect global liquidity.

Balancing Act
In India, it appears that the optimism in our markets would continue till the budget session of Parliament begins. The delicate balance of matching political demands of meeting populist expectations with reforms demanding markets would be tricky. It could upset the applecart of a booming market. One needs to play out the intervening period of the next seven weeks carefully and plan on a weekly basis action to be taken. One may see corrections ahead this week simply because we have risen for four days at a stretch. Use any dips to build long positions with adequate stop losses in place. The BSE SENSEX has support at 19,710 points, then at 19,592 points, then at 19,372 points and finally at 19,137 points. It has resistance at 19,827 points, then at 19,945 points, then at 20,168 points and finally at 20,310 points. The NSE NIFTY has support at 5,991 points, then at 5,935 points, then at 5,867 points and finally at 5,811 points. It has resistance at 6,030 points, then at 6,069 points, then at 6,131 points and finally at 6,182 points.

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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