The week gone by was eventful with expiry of January futures happening on Thursday January 31, followed by the budget on Friday on February 1. Markets began the week with losses and rallied strongly on Thursday and Friday to end the week with gains. BSE Sensex gained 443.89 points or 1.23 per cent to close at 36.469.43 points. NIFTY gained 113.15 points or 1.05 per cent to close at 10,893.65 points.
Dow Jones gained 326.69 points or 1.32 per cent to close at 25,063.89 points.
January Nifty futures expired on a positive note and closed at 10,830.95 points, a series gain of 51.15 points or 0.47 per cent. This was an extremely choppy series and neither the bulls nor the bears were in control of the same. The markets kept on oscillating in a broad 200 points positive and negative range, with the bulls finally winning a closely fought series.
Budget was presented on Friday and had enough for the vulnerable sections which were probably affected and were thus unhappy with the government. The small farmer has been provided with an assistance of Rs 6,000, the middle class with effectively a monthly salary of Rs 60,000 and investing the maximum amount of Rs 1.5 lakh under 80C would pay no income tax. Further the worker in the unorganised sector has been provided a pension of Rs 3,000 per month post attaining the age of 60 years on payment of Rs 100 per month. There has been some maths used in managing the fiscal deficit even after providing Rs 75,000 crore for the farmer scheme. This money would come from a larger dividend from RBI and the expectation of better and buoyant tax collections.
The opposition certainly would not like the budget because the ruling party did not fall for farm loan waiver which was done by them in three states which went to the polls and the ruling party lost. They termed the whole budget as ‘jumla’ and ridiculed the farm assistance of Rs 6,000 for the marginal farmer as a daily allowance of Rs 17 per day. Strange are the ways of politics and politicians.
The market liked the budget because it did not go overboard on grants, subsidies and doling out money to win votes. It kept the fiscal discipline even though the elections would tempt to go full hog. While the fiscal deficit could see some slipping, it is still manageable.
The week also saw the primary market issue from Chalet Hotels Ltd open and close for subscription. The company raised Rs 950 crore as a fresh issue and an offer for sale of 2.4685 crore shares in a price band of Rs 275-280. The issue was exorbitantly priced and left nothing on the table for the investor. This is confirmed by the poor subscription that the issue received. Except the QIB portion which was subscribed 4.66 times, HNI portion was subscribed 1.10 times and Retail a mere 0.03 times. This from an issue which the merchant bankers were confident would revive the primary market. The biggest shocker was the fact that there were a mere 5,250 applications received where based on the minimum application of 53 shares, there should have been 3.91 lakh applications for the retail portion to be subscribed.
Its time merchant bankers stopped being greedy and pricing issues so aggressively. Investors should be allowed to make money in issues as they are taking risk. Outpricing helps no one.
The week ahead sees RBI meeting for its bi-monthly review. It is widely believed and expected that rates would be kept unchanged as with the government in an election mode there could be a minor rise in inflation. A possible rate cut is certainly ruled out and the possibility of a hike in these circumstances where inflation is under check is unlikely.
Markets will continue to be volatile and display both sided movement as they grapple to understand the implications of the budget. The fact that FIIs have become buyers is a positive sign for our markets. With the mood on the street continuing to be bearish, it makes sense to refrain from shorting the market.
(Arun Kejriwal is founder of Kejriwal Research and Investment Services)