Remain on sidelines, stay contrarian
The market continued to trade in a sideways but volatile manner. Friday was a bad day and the market lost about a per cent in trading. On a weekly basis, the losses were 0.75 per cent on the BSE and 0.61 per cent on the Nifty. The crack on Friday was swift and it wiped out gains of the week and brought the indices to critical levels of support.
The week ahead has a trading holiday on Thursday, the 26th of January, for Republic Day. So the January expiry of futures would happen a day earlier on Wednesday. The Nifty’s current value, at 8,349.35 points, is higher by 245.75 points, or 3.03 per cent, compared to the December 2016 expiry levels. The current gains are good enough for the bulls to keep having the upper hand but the quarterly results could upset the balance.
The 45th President of the USA, Donald Trump, was sworn in on Friday. He has launched a punch line of ‘Buy American, Hire Americans.’ While there is nothing new in the line, its ramifications could be far reaching. Countries like China could get affected in terms of trade and India in terms of its offshoring of IT professionals. However, one needs to see how the President follows up on his statements.
The Dow Jones lost 58.48 points, or 0.29 per cent, for the week to close at 19,827.25 points. The rupee lost 3 paise, or 0.04 per cent, to close at Rs 68.18.
In the primary market, the CPSE-ETF received excellent response. The issue is oversubscribed and in the absence of bidding, category-wise subscription details would be known only later. From estimates, it appears that the retail portion saw bids of around Rs 2,500 crore. Pension funds have also bid aggressively. The issue has preference for retail investors, with the entire Rs 4,200 crore available for subscription, followed by pension funds and only then QIBs and HNIs. The possibility of the last two not getting allotment, or only a very small portion, is likely.
The BSE issue, which opens for subscription today and closes on Wednesday. is seeing a lot of interest. The exchange is offering 108 lakh shares in a price band of Rs 805-806. The issue would raise Rs 1,243 crore in total from the offer for sale. This would be the second listing of an exchange in India after MCX. There is an active grey market currently in this share with a premium of almost about Rs 160-185 over the issue price. The company on Friday allotted 46.28 lakh shares at Rs 806 to 25 anchor investors comprising 38 entities. The highest allocation was made to Smallcap World Fund, which was allotted 8,68,500 shares, or 18.77 per cent of the anchor allocation. The list has a large number of marquee investors and also domestic mutual funds.
The budget is expected on Wednesday, the 1st of February, and some changes in tax laws are widely expected. Increased spending on infrastructure and some positive announcements for the housing sector, particularly affordable housing, are anticipated. Some feel good measures to dispel the negative feelings post-November 8 are also expected.
The quarterly results declared so far have not been negative or reflective of a slowdown. A reason for that could be that companies which have declared results so far are not from the consumer space where cash dealings would have affected the performance. Once these results start trickling in, one would get a better idea about corporate India’s performance.
The market is looking tired and jaded. It seems to be going nowhere, as it just hovers around current levels. There is optimism around and almost everybody believes that all is well. In such a scenario there are enough buyers on every dip, even though the volumes are thin.
I maintain my stand to remain on the sidelines and use sharp rallies or falls to initiate contrarian calls. Remain light, nimble-footed and await policy announcements. The US president is just about two-three days old at his job and would begin making statements by the dozen, which have the possibility of shaking the world to either side. Get used to his statements before jumping the gun. Trade cautiously.

The author is founder, Kejriwal Research and Investment Services
Arun Kejriwal