Crude shock

The recent fuel price hike will further add to the already spiralling inflation and make matters worse

Crude shock

The recent fuel price hike will further add to the already spiralling inflation and make matters worse

The markets opened on an extremely weak note last Monday and the BSE Sensex made an intraday low of 17,314 points, a loss of 556 points before recovering.

BJP supporters protest against price hike at Matunga on June 26

The markets were up on Thursday but, on the last day of the previous week, they simply went ballistic. The BSE Sensex gained a whopping 513 points towards the end the week and closed at 18240.68 points, a gain of 370.15 points or 2.07 per cent.

The NSE Nifty similarly gained 104.85 points or 1.95 per cent to close at 5,471.25 points. The indices came within a whisker of the February 11 low and have bounced for once. This bounce will give the market breathing space but does not in any manner indicate that we are out of the woods as yet.

Gaining
The broader markets saw the BSE100, BSE200 and BSE500 gaining but almost half of what the benchmark indices gained, with gains of 1.47 per cent, 1.07 per cent and 0.72 per cent respectively. Hero Honda gained Rs 136 or 7.86 per cent to close at Rs 1,866, while Infosys gained 3.55 per cent.

Loss
The big loser during the week was GTL, which lost Rs 230.15 or 67.71 per cent to close at Rs 109.75. The share has in a span of six trading sessions become 1/4th of its value because of pledged shares of the promoter being sold by lenders. Some other stocks also saw sharp volatility on account of pledged shares but none as sharp as GTL and GTL Infra, which are group companies.

Listing
Timbor Home Limited listed on June 22. The stock, which was issued at Rs 63, made a high of Rs 109 and closed at Rs 88.20 last Friday. Though the share is still a good 40 per cent above the issue price, it now looks headed down and all the fizz in the share was over in the first two days.

Subscription
The two IPOs, which had opened for subscription during the previous week managed to get subscribed. Rushil Decor was subscribed 2.62 times and Birla Pacific Medspa was subscribed 1.18 times. This week sees one new IPO from Readymade Steel, which is raising Rs 34.75 crore in a price band of Rs 90-108. The company has reported revenues of Rs 81.45 crore in the nine months ended December 2010 and a net profit of Rs 2.32 crore.
The asking price band on a fully diluted basis and annualised numbers for the year ended March 2011 comes to 36 times at the lower end of the price band and 40.91 times at the upper end of the price band. The issue is extremely expensive and should be avoided even though there could be speculative interest as has been seen in small issues.

Yield
The other issue is a secured debentures issue from Shriram Transport Finance Limited, which is raising Rs 500 crore with an option to retain oversubscription of upto 100 per cent. The issue offers a coupon rate of 11.35 per cent for 3 years and 11.6 per cent for 5 years to retail investors who can apply upto 5 lakh each. The SBI bond issue, which was highly successful, had offered a coupon rate of 9.95 per cent for retail investors. These bonds would be listed on the NSE and are offered on a first come first served basis. The bonds offer excellent yield and I recommend that investors apply for the same.

Concern
Diesel prices were finally raised by Rs 3 per litre. Customs duty of 5 per cent on crude oil was abolished and excise duty on diesel was cut by Rs 2.6 per litre to reduce the impact on the common man. Kerosene prices were increased by Rs 2 per litre and cooking gas prices by Rs 50 per cylinder. These increases though overdue, would increase the already spiralling inflation and make matters worse.

The week ahead would see the futures for June series expiring on Thursday June 30, leading to volatility in the week. The Nifty had closed for the May series at 5,412.35 points, and is currently a mere 60 points higher than the opening level. One expects volatility and profit booking at higher levels. The momentum of the last two days during last week is likely to continue for maybe a day or two. Use the same to book profits and re-enter at lower levels.

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. 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.k

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