All action stations

The week gone by had all the action and drama what with the Railway Budget, Economic Survey and Union Budget being presented. To add a tinge of spice, the February futures series also expired last Thursday. The markets have turned weak and lost considerable ground.

Finance Minister P Chidambaram (c) waves as he leaves the Finance Ministry to present the Union Budget at Parliament in New Delhi on February 28, 2013. Pic/AFP

The week saw the BSE SENSEX losing 398.49 points or 2.06 per cent to close at 18,918.52 points. The NIFTY lost 130.60 points or 2.23 per cent to close at 5,719.70 points. The broader market saw the BSE100, BSE200 and BSE500 losing 2.40 per cent, 2.48 per cent and 2.66 per cent respectively. The BSE MIDCAP and BSE SMALLCAP were big losers with the midcap losing 4.36 per cent, while the smallcap lost 5.36 per cent.

Stocks
The BSE CONSUMER was the biggest gainer up 3.71 per cent. The other gainer was BSE IT up 2.39 per cent. The losers included BSE REALTY down 8.60 per cent, BSE PSU down 5.00 per cent and BSE OIL down 4.59 per cent. In individual stocks, Titan Industries was up 7.04 per cent, McDowell up 3.59 per cent and TCS up 3.10 per cent. The losers included REC down 10.85 per cent, Chambal Fertilisers down 10.02 per cent and Hindalco down 7.65 per cent. Many midcap and small cap stocks like Core Education, Aanjaneya Lifecare, Lovable Lingerie, Sudar Industries and Rushil Décor lost between 40 and 60 per cent. Many of these stocks are associated with operators and when their positions were unwound led to margin calls and offloading by financiers.

Railway
The railway budget has increased incidental charges like reservation fees on passenger fares and increased the fuel adjustment charge on freight for goods. Going forward there would be a fuel adjustment charge, which would be periodically changed to balance the fuel cost. The economic survey presented made people a little bullish on the future of the Indian economy. The Union Budget was a mixed bag and coming from a lawyer would lead to many interpretations on the fine print.

Mixed
The capital markets have a mixed response to the budget. The RGESS scheme has been modified where the limit of 10 lakh has been increased to Rs 12 lakh and more significantly, the period of the scheme has been increased from one year to three consecutive years. In terms of STT (Securities Transaction Tax) the same has been reduced on derivatives and mutual funds, which are equity, linked but remain unchanged for the cash segment of the equity market. Why such discrimination against the cash segment is a matter, which the FM needs to clarify. As regards commodities, the much-expected CTT (Commodity Transaction Tax) has been introduced on the lines of STT.

Rupee
The budget has kept the fiscal deficit at 4.8 per cent, and this figure is the same given by the FM on his four-city tour to woo FII investors. The deficit is arrived at after providing an increase in 30 per cent for plan expenditure and presumes that the GDP would grow at a rate of 6.2 per cent to 6.7 per cent in the year 2013-2014. It may be mentioned that the GDP for the quarter ended December 2012 has fallen to 4.5 per cent against 5.3 per cent a year ago. Similarly, the buoyancy on the tax revenues expected all appear to be very aggressive making the deficit figure look understated. The Indian rupee fell during the week to Rs 54.90.

Negative
FIIs were purchasers of stock of Rs 544 crore while domestic institutions bought stock worth Rs 632 crore during last week. FIIs in the first two months have invested $ 8 billion in the Indian markets. This includes money invested in the government divestment of NTPC and NMDC amongst others. The February futures expired at a level of 5,693.05, a loss of 341.25 points or 5.65 per cent for the month. The markets have turned negative for the current calendar year 2013 and are now down by 2.6 per cent on the SENSEX and 3.59 per cent on the NIFTY after the first two months.

Downgrade?
The confusion on Mauritius and the tax treaty, which was subsequently clarified by the FM post markets on Friday, would see some rally in the coming week but the momentum seems to have been broken. The US has for the time being, decided to cut spending by 85 billion dollars and there is a possibility that global commodity prices would soften. This softening of prices would benefit India, but if global markets tumble, we would be a part of the fall. FITCH, an international credit agency has said that a downgrade of the Indian economy is likely. In case something like this does happen, this would hurt India more than all the problematic issues of the budget put together.

Support
The BSE SENSEX has support at 18,829 points, then at 18,666 points, then at 18,508 points and finally at 18,255 points. It has resistance at 18,998 points, then at 19,166 points, then at 19,288 points and finally at 19,381 points. The NSE NIFTY has support at 5,686 points, then at 5,632 points, then at 5,597 points and finally at 5,548 points. It has resistance at 5,746 points, then at 5,805 points, then at 5,853 points and finally at 5,883 points. Volatility would be the order of the day, hence, trade cautiously.

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 https://ak57.in

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