Arun Kejriwal
Markets will be extremely choppy this week and
likely to fluctuate with sharp gains and loss on different days.
The August series futures would expire on Thursday.
The July series was at a level of 5,907.50 points, a loss of 435 points, or 7.96 per cent.
The
market recovered very sharply on the last two days of the previous week from a new low in the calendar year 2013.
The Sensex saw a low of 17,759 points against the earlier low of 18,144 made in April while the Nifty low was 5,254 against 5,477.
The rupee's movement, global cues and flow of foreign funds will be the main drivers of the stock market even as shares are likely to remain volatile in view of derivatives expiry. Besides, gross domestic product data for the first quarter, which would be declared on Friday, will be keenly watched.
The rupee hit a new low of 65.56 before recovering sharply to 63.20 helping the indices recover. The depreciating rupee saw gold prices rise sharply to Rs 32,200 while silver rose to Rs 53,500.
Foreign institutional investors were sellers of Rs 2,900 crore of equity while domestic institutions, led by Life Insurance Corporation, supported the market and bough equity worth Rs 2,400 crore.
In global markets, Quantitative Easing by the US Federal Reserve continued to dominate market movement. The consensus that seems to be emerging is that the Easing would certainly begin next month and the uncertainty on how soon it will end. This saw world markets end in a negative territory with Dow Jones closing with a weekly loss of half- a- per cent. The Cabinet decided that it would be mandatory for large projects to buy equipment from local companies, which saw Bharat Heavy Electricals Ltd recover sharply.
While the intention is good, halfbaked measures and coming without a well thought- out plan is helping nobody.
Finance minister P. Chidambaram has been maintaining that the current account deficit will be maintained at $70 billion but what has not been mentioned is what would be the currency's value at that time. At a conversion rate of 58, it translates into a deficit of Rs 4.06 lakh while at a rate of 65, it is Rs 4.55 lakh. Chidambaram needs to specify the currency rate at which he is assuming the deficit.
The National Spot Exchange crisis is growing with only half the money paid out in the first weekly payout and a mere five per cent of the amount being received as of Friday. Clearly, the government and its agencies need to take swift action and also act against the governing board of the exchange. A sum of Rs 5,500 crore is not a small amount which can be just ignored. This would impact equities market going forward.
This week will be tough for markets. Key drivers would be the rupee and the action the Reserve Bank of India takes in defending the currency. There is a strong rumour making the rounds that the government may deregulate diesel prices and raise them by Rs 6- Rs 8 per litre. It could only happen post Parliament closing the current session.
A trading strategy could be to buy calls of the oil marketing companies for September series which are out of money. Trade cautiously in a bearish market.
( The writer is an investment analyst)
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