Market movement in the time of heavy news-flow

By Arun Kejriwal

Markets opened with gains on Monday and then lost ground on three of the four trading days thereafter. They say a week is a long time and this was truly so this time around.

 

The market was packed with news-flow and it seemed never ending. It began with Sun Pharma clearing the air about the whistle-blower issues. Yes Bank appointed a new MD and CEO. CBI filed an FIR against ICICI Bank MD Chanda Kochhar. The week ended with Subash Chandra sending a letter about the debt on his group companies' balance sheets and apologising to stake holders.

BSE Sensex lost 361.07 points or 0.99 per cent to close at 36,025.54 points. Nifty lost 126.45 points or 1.16 per cent to close at 10,780.50 points. After a choppy week, Dow managed to close with marginal gains of 30.85 points or 0.12 per cent at 24,737.20 points.

Sun Pharma calmed the nerves of investors by addressing the issues raised by the whistle-blower and the share rallied Rs 31.45 or 8.05 per cent to close at Rs 422.20. Yes Bank announced its third quarter results and the appointment of its new MD and CEO Ravneet Gill, ex-CEO Deutsche Bank India operations.

The share was up Rs 21.40 or 10.79 per cent at Rs 219.65. During trading on Friday it had touched a high of Rs 236.30 on short covering.

Maruti Suzuki posted a poor set of numbers on account of lower sales and the share was hammered. It lost Rs 837 or 11.38 per cent to close at Rs 6,516, its lowest value in about 20 months.

Subash Chandra sent an open letter to stakeholders at the end of the day (Friday) after the parent company and group company share prices were hammered and lost Rs 120.80 or 27.45 per cent to close at Rs 319.35. Intra-day they had touched Rs 288.95. The letter asks stakeholders to be patient till the stake sale happens and Subash Chandra admits to having made wrong decisions in the course of the business, particularly in respect of the D2H acquisition and some other businesses.

In a very important ruling, the Supreme Court has held the Insolvency and Bankruptcy Code tenets to not allow promoters of stressed assets to bid for them as correct. Hopefully the spate of cases currently on would now come to an end.

The week ahead has two events coming up and the timing of the same is of great importance. On Thursday, Jan 31, futures expire for January series.

The current level of the cash value of Nifty at 10,780.50 points is as flat as a doormat as the same is up 0.70 points or 0.01 per cent for the series. With the budget up on Friday, one can expect expiry to be a volatile affair.

The union budget would be presented on Friday, February 1. This budget would be presented by acting FM Piyush Goyal in absence of the unwell Arun Jaitley. The backdrop of this budget is the upcoming general elections in April and May which would be a no holds barred election.

As a precursor to the same the budget would set the tone. Expect announcements to pamper the different voter class and make it a case where the opposition says that they would not pass the proposals if they are elected to power. This challenge would be the dilemma that the opposition faces. If they agree, they are second and if they disagree, they lose votes. A classical Catch-22 situation. This would be akin to the historic reservation bill which was proposed and voted in flat 48 hours without any opposition ultimately.

Expect farmer assistance to be paid on land holding before the start of the new sowing season direct into the bank account akin to the Telangana model and the recently announced Odisha model. The exemption limit for income tax being raised from the present Rs 2.5 lakh to maybe Rs 3.5 lakh if not Rs 5 lakh.

Enhancement of limits under 80 CC of the income tax and some sops for the MSME and SME segments. It would be the mother of all budgets where the purse strings after 4-and-a-half years of financial prudence would be opened and just distributed. While puritans may not agree with what is being said or will be done there are enough precedents of this in the past as well.

Markets in the week ahead will be choppy and will react to news flow from company results and events as they unfold. Trade cautiously.

(Arun Kejriwal is founderm Kejriwal Research and Investment Services)