Exit polls hold the key

The week gone by began with a strong opening as expected. With a fall on Tuesday and a neutral Wednesday, the week ended with a strong rally. The Sensex gained 574.54 points or 2.84 per cent at 20,791.93 points. The Nifty gained 180.65 points or 3.01 per cent to close at 6,176.10 points. The broader indices like the BSE100, BSE200 and BSE500 gained 2.97 per cent, 2.90 per cent and 2.84 per cent respectively. The BSEMIDCAP gained 2.78 per cent while BSESMALLCAP gained 1.76 per cent. The top sectoral gainer was BSECAPGOODS up 8.28 per cent. Other gainers included BSEBANKEX up 4.33 per cent and BSEAUTO up 4.05 per cent. There was just one loser in BSETECH down 0.81 per cent. This shows how strong and widespread the rally was. This is unlike some of the previous weeks where though the market rallied it was led by a handful of stocks.

Gainers
In individual stocks the biggest gainer was BHEL up 13.91 per cent. Other gainers included Larsen and Toubro up 8.20 per cent, ONGC up 7.32 per cent and Yes Bank up 7.01 per cent. The losers were led by Wockhardt whose problems with US FDAseem never ending and was down 12.90 per cent. The other losers included Jet Airways down 4.45 per cent and Bharti Airtel down 2.72 per cent.u00a0The November series expired with a net loss of 72.5 points or 1.17 per cent at 6,091.85 points. The expiry was quite smooth and there was hardly any volatility witnessed as one normally sees on expiry day. FIIs continued their purchases and bought shares worth Rs 1,317crore while domestic institutions for a change were buyers of shares worth Rs 496 crore. FIIs in the month of November bought shares worth Rs 7,000 crore while domestic institutions in the same period were net sellers of Rs 900 crs.u00a0The Rupee was volatile and gained 43 paise or 0.68 per cent to close at Rs 62.44. Dow Jones was virtually flat but gained 23 points or 0.14 per cent to close at 16,086.77 points.u00a0

Improvement
In domestic news while GDP at 4.8 per cent was significantly better than expected, the contribution from agriculture was more than significant. We have had an excellent monsoon this year and this was a major contributor to the sharp improvement in GDP. What is worrisome is the poor state of the manufacturing sector which could weigh on the RBI when they announce the monetary policy later this month. In the first seven months of the calendar year the government has already reached 84 per cent of the budgeted deficit. If a simple mathematical calculation is to be done this would take us to 144 per cent of the budgeted deficit. Very clearly there would be deferment of expenditure towards subsidies, and cutback or curtailment of expenditure, both plan and non-plan, happening henceforth. The customary diesel hike at the month end, of 50 paise, was done on Saturday at midnight but the under-recovery continues at just about Rs 10 per litre.

FPO
Power Grid is coming out with its FPO which opens on Tuesday, December 3, and closes on December 5 for QIBs and December 6 for HNIs retail and employees. The price band is an attractive 85-90 with a discount of Rs 4.50 for retail and employees. The closing price of Power Grid was Rs 95.05 on the BSE and Rs 95.10 on the NSE. The discount on the current price is Rs 10.05 on the lower band and Rs 5.05 on the higher or 10.57 per cent on the lower band and 5.31 per cent on the higher band. The price is certainly attractive and the issue could get oversubscribed in the retail category. The institutional portion should also do well and I believe that the issue will be oversubscribed in the institutional category as well. I recommend the issue to retail investors considering the retail discount of Rs 4.50 and the discount to the market price.

Forecast
The week ahead will be completely dominated by political news. Exit polls begin on the evening of December 4 and markets will lap up these numbers and play on them in the two trading days remaining before results are out on Sunday, December 8. As has been mentioned by one and all, the stock markets are behind the opposition and markets can turn into a festive mood if the BJP is seen as increasing its hold on more states than the two out of five it currently holds. The all-times of the Sensex and Nifty are at stake this week. The range for the week is big as the movement could be in either direction. Depending on the exit polls and then the results the market would move in one direction but the million dollar question is which direction. I would bet on a new high being the direction.
Key levels for the Sensex are 20,155 and 21,025 while they are 5,975 and 6,245 for the Nifty. The support for the Sensex is at 20,627 points, then at 20,472 points, then at 20,361 points, then at 20,125 points, and finally at 19,755 points. It has resistance at 20,888 points, then at 20,965 points, then at 21,149 points, then at 21,325 points and finally at 21,508 points. The Nifty has support at 6,125 points, then at 6,076 points, then at 5,995 points, then at 5,905 points and finally at 5,865 points. It has resistance at 6,204 points, then at 6,255 points, then at 6,332 points, then at 6,381 points and finally at 6,445 points. Enjoy the festivities in the coming week.u00a0Arun 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.inu00a0

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