Time seems ripe for a rally to begin

The week began on a positive note and the market gained and lost on alternate days, till Thursday and Friday. These two days turned the market topsy-turvy and saw huge volatility.

The market saw the Sensex lose 759 points on Thursday and gain 732 points on Friday. The Nifty similarly lost 225 points and gained 237 points. The net change during the week saw the Sensex gain 356.59 points, or 1.03 per cent, to close at 34,733.58 points, while the Nifty gained 156.05 points, or 1.49 per cent, to close at 10,472.50 points.

The daily closing change saw the Sensex gain 1,231 points and lose 934 points, for an effective weekly change of 2,225 points.

Similarly, the Nifty gained 428.50 points and a lost 272.45 points for a cumulative change of 700.95 points.

On a calendar year-to-date basis, the Sensex turned positive after Friday’s gains while the Nifty was marginally in the red. BSE’s mid- and small-cap indices are down by 24.75 and 35.82 per cent, respectively, indicating the extent of pain and value erosion in the space. Even at these levels, confidence is yet to return to the marketplace.

The Dow Jones was under pressure and lost 1,107.06 points, or 4.37 per cent, to close at 26,447.05 points. The Dow on a calendar year-to-date basis is up 2.5 per cent, having lost a lot of it during the week.

The rupee saw recovery on Friday to gain 21 paise, or 0.29 per cent, for the week at Rs 73.56. During the week the rupee had touched a low of Rs 74.95.

In primary market news, the issues from Aavas Financers listed on October 8 and had a poor debut. Shares were issued at Rs 821 and after having a discovered price of Rs 758 closed for the day at Rs 773.15, a loss of Rs 47.85 or 5.83 per cent. Delivery volume as compared to the IPO size at 3.74 per cent was extremely low and this could be because the issue was undersubscribed in retail and HNI categories. The share at the end of the week recovered marginally to close at Rs 780.85, down 4.89 per cent.

The other share to list was PSU Garden Reach Shipbuilders and Engineers which had struggled to get subscribed. The issue was extended and just about managed to get subscribed. The issue had a discovered price of Rs 104 against an issue price of Rs 118. The share closed at Rs 105.90, a loss of Rs 12.90, or 10.93 per cent. As week ended, the price had fallen to Rs 102.05, a loss of Rs 15.95, or 13.52 per cent. Delivery volume was extremely low at under 1 per cent of the issue size. One must remember that about 46 lakh shares, or 15.75 per cent of the total 2.92 crore issues, was from HNIs, Retail and Employees. This effectively means that the share could remain under pressure for some time till deliveries from these investors is absorbed.

The market has a trading holiday because of Dussehra on Thursday, October 18. There has been a more than healthy correction over the last 40 days in the market and the time seems ripe for a rally to begin. The correction has taken its toll on everybody and along with the market, crude oil and the currency were also under pressure. The rupee seems to have bottomed out and crude prices are also looking like cooling off for now. The stage seems set for some upward movement.

The top gainers last week were the oil marketing companies. HPCL, which had lost a third in value, recovered during the week and gained Rs 53.20, or 24.38 per cent, to close at Rs 218.25. The sector under pressure was IT, which saw a sharp rally over the previous weeks. TCS posted a strong set of numbers but lost ground to lose 9.63 per cent at Rs 1,918.40. The entire IT pack was down, with the BSE IT losing 7.03 per cent.

Enjoy the rally as it unfolds but keep in mind that the trade wars are not yet resolved and there will be knee-jerk reactions to it as we go along.

(The author is founder, Kejriwal Research and Investment Services)

Arun Kejriwal