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Saturday, May 15, 2021

Post Budget Sprint, markets need to catch their breath

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46% businesses in India fear negative COVID-19 impact for 1 yearBy Arun Kejriwal The budget for 2021-22 presented by Finance Minister Nirmala Sitharaman rocks. This was the FM’s third Budget. It truly was a daring and earth-shattering budget which has taken the markets to newer heights. Markets boomed not only on budget day, but have been gaining on a daily basis over the last five days since the budget was presented. BSESENSEX gained 4,445.86 points or 9.61 per cent to close at 50,731.63 points. NIFTY gained 1,289.65 points or 9.46 per cent to close at 14,924.25 points. BSE100, BSE200 and BSE500 gained 9.04 per cent, 8.79 per cent and 8.61 per cent respectively. BSEMIDCAP was up 7.36 per cent while BSESMALLCAP gained 6.16 per cent.

The highs on the BSESNSEX were 51,073.27 points which means that the intra-day fall from the high of Friday was over 440 points while the similar level on NIFTY was 90 points from the high of 15,014.65 points. Two more milestones were achieved on Friday with BSESENSEX touching 51k and NIFTY touching 15k. Both levels have come at a very rapid pace. Gains witnessed post budget are the best in about 20 years while the near 10 per cent gains witnessed over the week, are the highest weekly gains in over ten years. Both these events are indeed quite unique and demonstrate the confidence the market has in the FM and her Budget.

The Indian Rupee gained 3 paise or 0.04 per cent to close at Rs 72.92 to the US Dollar. Dow Jones had a decent week gaining 1,165.62 points or 3.89 per cent to close at 31,184.24 points.

The Budget has laid emphasis on infrastructure, development and production. It gives incentives for producing more, is backing on employment and multiplier effect based on renewed thrust of infrastructure creation and investing in the same. With large amount of expenditure planned in health, sanitation and water works and education, the government is willing to allow the deficit to increase significantly and wait for three to four years before the fiscal deficit returns to the normal. The budget has also introduced a new cess on agri, infra and development, which would be neutral to users as the levy would be offset against the prevailing duties present now. This would benefit the centre as the revenues on this head would not be shared with the states. In signalling and confirming the governments intent, market capitalisation at the BSE crossed the two trillion mark for the first time. A landmark milestone being achieved and crossed. This would pave the way for the stated goal of India becoming a five trillion economy by 2025.

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The monetary policy of RBI was announced during the week. RBI has maintained a status quo on all rates and improved on its expectations on performance of Indian Economy. It expects the GDP to grow to 10.5 per cent in the coming year on the current base which has fallen during Covid-19.

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The week gone by saw three primary issues list. The first was Indigo paints which had issued shares at Rs 1,490. Shares debuted at Rs 2,607.50, made a high of Rs 3,348 during the week and closed at Rs 2,630.45, a weekly gain of Rs 1,140.45 or 76.54 per cent. The second listing was from Home First Finance Limited which had issued shares at Rs 518. The share debuted at Rs 612.15 and closed for the week at Rs 548, a gain of Rs 30 or 5.79 per cent. The third issue was from Stovekraft Limited which had issued shares at Rs 385. The share debuted at Rs 467 and closed at Rs 445.95, a gain of Rs 60.95 or 15.83 per cent. The primary market offerings have done reasonably well so far and one would hope that they are able to hold on to their gains going forward.

There was a primary issue from Brookfield REIT which raised Rs 3,800 crore in a price band of Rs 274-275. The issue was subscribed 7.97 times with QIB portion subscribed 4.80 times and non-institution portion subscribed 11.78 times.

State Bank of India posted a decent set of numbers and the stock rallied Rs 111 or 39.35 per cent to close at Rs 393.05. This performance also helped the BSEBANKEX post a spectacular gain of 16.27 per cent for the week. Shares of Indusind Bank gained 21.16 per cent, Bajaj Finance 16.96 per cent, HDFC Bank 14.81 per cent and ICICI Bank 14.45 per cent.

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Coming to the Covid-19 front, the world had 10,63,42,901 patients, 23,20,445 deaths and 7,79,80,164 patients who had recovered. In India we had 1,08,27,170 patients, 1,55,028 deaths and 1,05,21,409 patients who had recovered. Compared to the previous week the world saw 32,04,233 new patients, 90,940 deaths and 32,10,397 patients recovering. In India we saw 80,079 new patients, 716 deaths and 98,284 patients recovering. This is the first time that the number of patients recovering during the week is more than the number of new patients globally. This is an encouraging sign. One cannot say with certainty that this is because of vaccination and one would have to wait for about two weeks to confirm the outcome of the vaccination.

The week ahead would see markets increasing the breadth of the rally where midcap and Smallcap stocks become the centre of the rally. While having had a spectacular rally in the previous week, one is likely to see profit taking at higher levels. Markets would be volatile and intraday moves would become bigger and sharper. There is no way they can continue to gain through the next week. There would be volatile bouts of buying and selling in the coming week with the stocks participating and leading market movement in both directions, changing names. Different stocks would participate on different days. In such a scenario it makes sense to continue booking profits and allowing the markets to enter into a consolidation phase before re-entering markets. Patience would be the key in the coming weeks as markets test your holding and digesting gains capacity.

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(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)

Source: IANS

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