Sunday, February 6, 2011

Several companies are having a torrid time at the bourses

Several companies are having a torrid time at the bourses : Last week was topsy-turvy for the markets but the BSE SENSEX managed to hold on to the 18K level by the skin of its teeth. Last Friday, the last day of trading, saw the index break the level intraday and make a low of 17.926 points, which is a significant event.

The NSE NIFTY broke the 5400 point level and this was the second consecutive week of loss, for the benchmark indices. The BSE SENSEX lost 387.82 points or 2.15 per cent to close at 18,008.15 points for the week. The NSE NIFTY lost 116.40 points or 2.16 per cent to close at 5,395.75 points.

Lost
The broader indices like the BSE 500, BSE 200 and BSE 100 lost between 2.02 and 2.03 per cent, while the BSE MIDCAP lost 2.43 per cent and the BSE SMALLCAP lost 2.58 per cent.

The big loser for the week was BSE FMCG, which lost a staggering 220.77 points or 6.87 per cent to close at 3214.30 points.

A big contributor to this fall was ITC, which lost Rs 15.40 or 10.07 per cent to close at Rs 152.90. The BSE IT
was another loser with a weekly loss of 3.21per cent at 6,258.5 points.

Torrid
BSE REALTY continues to be a loser and within the space two companies in particular are having a torrid time at the bourses. DB Realty lost Rs 10.10 or 7.22 per cent to close at Rs 139.85 while Unitech lost Rs 7.95 or 18.45 per cent to close at Rs 43.10.

These companies were allotted telecom licenses and have then sold a large part of the stake to foreign companies like Etisalat and Telenor respectively, at huge profits. These companies have been called for interrogation and the shares are likely to be under pressure going forward.

Panic
There was virtually no news on the IPO front except the fact that Tata Steel shares post the FPO have been listed and held ground on a weekly basis. There are no issues planned in the immediate future and probably the first issue could be from the Government itself.

The markets are being driven by panic and there is complete confusion currently. The good thing is that selling by foreign institutional investors has not only stopped but they have actually turned buyers in the last two days.

One hopes this is not an aberration and this becomes a trend. International news led by Egypt and local news led by 2G scam, inflation and muted attempts by various politicians and government officials to justify the same are affecting the markets. This is likely to continue for some time.

Impasse
There is a meeting between various political parties on Monday (today) to decide on the parliament impasse. I believe with the former telecom minister in CBI custody, the possibility of a JPC being instituted becomes quite likely and in the interest of democracy.

Assuming something like this happens, there is a strong possibility that markets could rise during the week and also provide a technical rally. Markets are currently oversold and a relief rally is certainly overdue and has to happen any time soon.

Markets look weak and may fall further but falling from here without recovering first look improbable. I would bet on a weak first day and either improving towards the end of Monday itself or a strong Tuesday.

Resistance
The BSE SENSEX has support at 17,726 points then at 17,356 points, then at 17,160 points and finally just below the 17K level at 16,969 points. It has resistance at 18,391 points, then at 18,542 points, then at 18,735 points, then at 18,904 points and finally at 19,006 points.

The NSE NIFTY has support at 5,324 points, then at 5,235 points, then at 5,185 points, then at 5,112 points and finally at 5,085 points. The resistance is at 5,511 points, then at 5,556 points, then at 5,605 points, then at 5,698 points and finally at 5,735 points.

Fishing
The week beginning Monday February 7 will be extremely volatile and would see huge intraday price movements. I believe, looking at the market technicals, the current political scenario that the market is likely to move up after some initial weakness.

Investors could do some bottom fishing with strict stop losses and look to make 10 per cent to 14 per cent on the upside in the short term. Traders should play the market from both sides but carrying forward shorts at the end of the day is likely to be dangerous.

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 http://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 is 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.
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