With expiry of May futures in 4 days' time, markets would be volatile and choppy
A Kim Jong Un impersonator poses holding a durian fruit in front of the Esplanade theatre in Singapore yesterday. US President Donald Trump on May 24 cancelled a planned June 12 meeting with North Korean leader Kim Jong Un in Singapore, citing “open hostility” from Pyongyang. But within 24 hours he reversed course, saying it could still go ahead after productive talks were held with North Korean officials. Pic/AFP
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Markets were volatile last week with four of the five trading sessions witnessing moves of 250 points or thereabout on the BSESENSEX. On a weekly basis however, the net change was 76.57 points or 0.22% to close at 34,924.87 points. NIFTY gained 8.75 points or 0.08% to close at 10,605.15 points. The broader markets saw the BSE100, BSE200 and BSE500 gain 0.25%, 0.20% and 0.11% respectively. BSEMIDCAP was up 0.05% while BSESMALLCAP was down 1.02%.
The top sectoral gainer was BSEIT up 2.55% followed by BSETECK 2.49% and BSEBANKEX 2.02%. The top loser was BSEOIL&GAS down 2.60% followed by BSEREALTY 2.44% and BSECONDUR2.07%. In individual stocks the top gainer was SBI up 10.41% followed by Bank of Baroda 10.38% and Hindalco 5.45%. The top loser was Vedanta down 7.42%, Hind Petro 5.76%, Tata Steel 4.28% and ITC 3.75%.
Dow Jones was up a mere 38 points or 0.15% to close at 24,715.09 points. The Indian Rupee recovered ground after being under pressure for quite some weeks. The low of the rupee was R68.69. It closed at R67.78, a gain of R21 paisa or 0.31%.
Mixed notions
Global cues are mixed on the back of uncertainty of geopolitical issues like oil, Iran, China and North Korea. What will happen with the US calling off the summit with North Korea, no clarity on trade wars with China and the nuclear issue with Iran is causing a strain on global markets. The week ahead sees May futures expiring on Thursday the 31st of May. The current value of NIFTY at 10,605.15 points is lower by 12.65 points compared to the start of the series. The high of the series was at 10,929.20 points made on 15th of May when Karnataka results were declared, and the low was 10,417.80 points made on 23rd of May just last week. Currently the series is tied between the bulls and the bears and could go either way.
Pressure on boards
SEBI has written to ICICI Bank on the issue of disclosures in the case of CEO&MD and the loans of Videocon and Nu-power. While this notice was in the offing for a long time it has finally happened and would put pressure on the bank board and the CEO&MD. The second company in the news is Fortis Healthcare where the shareholders have voted out the last director after the other three stepped down prior to the EGM. The new board would have to relook at the binding bids before it and take a fresh call on the sale of Fortis group of hospitals. On yet another front the resolution plan of Binani Cement seems to be never ending and has become a court issue. When the sale would see the light of day is indeed a million-dollar question.
Reference material
The importance of these three issues is the fact that they would become a test case and reference material for the future when the role of the board is discussed and the role of the CEO, nominated directors and independent directors comes up. Primary market is quiet as far as the equity side is concerned but has become very active on the debt front. The size of issues and the coupon rates indicate that the issuers of debt expect interest rates to go up in the immediate future. RBI raising rates in the next meeting could be a reality and there could be more than just one rate hike in the current financial year. Rising rates could also act as a dampener on corporate earnings as higher interest rates has a cascading effect on costs.
With expiry of May futures in four days' time, markets would be volatile and choppy. The change in mutual funds holding of midcaps and small caps as designated by SEBI with 30th June 2018 being the deadline would keep this segment of the market under extreme pressure. Use any sharp dips to enter the market otherwise remain cautious.
Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd.
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 is for educational and information purposes only.
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