Arun Kejriwal
The rupee's movement,
macroeconomic data and investment by foreign funds will dictate
trend of stock markets this week, which will be shortened due to Ganesh Chaturthi on Monday. Industrial production and consumer price index data for July will be declared on Thursday, which are expected to trigger more volatility.
The rupee and markets rallied last week after new Reserve Bank of India governor Raghuram Rajan took charge. But the question is how long the rally will continue? Investors now want results after Rajan's much- hyped entry and a slew of measures he announced on the first day in office. There was a huge rally in the market led by the banking sector particularly by private banks. The rally was more on account of beaten- down values and shorts being covered rather than large fresh buying.
Foreign institutional investors were net buyers of equity worth Rs 1,782 crore last week while they sold a total of Rs 6,200 crore in August. The change in trend is welcome but one hopes it continues. Domestic institutions were sellers of Rs 701 crore during the week and bought equity worth Rs 1,610 crore during August.
The G20 summit in Russia saw two positive developments for the market, where the looming Syrian crisis seems to have divided the group on military action. This means that US would not take any action immediately until the UN Security Council approves it.
Secondly, the Brics group of nations requested the US that the easing of the financial stimulus be done in a gradual manner, which apparently means it's not going to happen immediately as was feared. Incidentally, job data in the US was not as expected giving further hope that withdrawal of the stimulus will not be done immediately. The Dow Jones gained 112 points, or 0.75 per cent, to close at 14,922 points.
Parliament's Monsoon Session has ended with the Insurance Bill being passed. The government is expected to take a call on raising diesel prices this week. CNG prices were raised by 8.35 per cent to around Rs 39.
The National Spot Exchange Ltd crisis has become larger. The government should take proper action with Parliament now adjourned sine die. Borrowers need to be brought to task as there is a clearcut case of diversion of funds in most of these cases.
The fact that adequate stocks are not there is a much smaller matter while the real case is the alternate use of funds for which they were borrowed, and apparently this has been done with the knowledge of the exchange authorities. Commodities markets have taken a big beating after the scam.
Key levels for this week will be 18,840 and 19,570 on the Sensex and 5,525 and 5,785 on the Nifty.
The week would be volatile and the euphoria on a new governor and global cues seem to be overdone. Ground reality on the economy has not changed. Book profits and trade cautiously.
(The writer is an investment analyst)
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