Advancing monsoon to cheer market but trade cautiously

Markets continued to remain volatile in the week gone by and lost on three of the five trading days while gaining on the remaining two. The net outcome saw BSESENSEX gain 200.15 points or 0.51 per cent to close at 39,394.64 points while NIFTY was up 64.75 points or 0.55 per cent at 11,788.85 points. The pivot of 11,700 held NIFTY in good stead and it went below this level only on Monday. The broader indices saw BSE100, BSE200 and BSE500 gain 0.68 per cent, 0.76 per cent and 0.79 per cent respectively. BSEMIDCAP was up 1.26 per cent while BSESMALLCAP gained 1.10 per cent.

June futures expired at 11,841.55 points, a series loss of 104.35 points or 0.87 per cent. This was a choppy and volatile series which saw a low of 11,625 points and a high of 12,103 points. The key support level of 11,700 held NIFTY through the month and even though there were occasions when the level was breached, the markets bounced back each time.

The rupee made decent gains and was up 53 paisa or 0.76 per cent to close at Rs 69.02 to the US dollar.

In primary market news, the offer for sale from Indiamart Intermesh Ltd was subscribed 36.21 times with QIB portion subscribed 30.83 times, HNI portion subscribed 62.13 times and Retail portion subscribed 14.07 times. There was a total of 4.21 lakh applications. The other issue from KPR Agrochem Ltd, which was to open on June 28, was withdrawn a day before it was to open.

With effect from July 1, applications in primary issues will undergo a sea change with the blocking of amount through "ASBA" being linked via UPI. This effectively means that an applicant would have to have a debit card as that alone is linked through UPI. Having a credit card will not help as the same is not linked to a bank account and there is no balance available. This introduction will affect applications in the immediate short term as investors get used to the new system. In the longer term it would require a new mindset to possess a debit card as a large number of investors are wary of having one.

SEBI has made a number of changes which would affect the markets, mutual funds and promoters. On the issue of pledge and encumbrance, they have said that any promoter who has 20 per cent of the share capital of a company or 50 per cent of his ownership pledged or encumbered would have to disclose the same and also mention the reason for the pledge. It has laid down norms for mutual funds where they have been restrained from entering into 'standstill pacts' with promoters against loans against shares. SEBI says that they are mutual funds who invest and not banks who lend. They have spelt out in greater detail conditions for issue of DVR shares or shares with differential voting rights.

In Osaka, the G20 meeting saw significant progress on the trade war between US and China with both agreeing to resume talks. In the meanwhile, there would be no further change in tariffs or duties for the time being. This itself is big news for the markets which would not only heave a sigh of relief but react positively when they open for trading on Monday morning. Even though no deadline has been set, this is some positive news on the trade war front after a very long time.

The budget would be presented on July 5 and there are no expectations on which the market has run up. On the contrary, there could have been some downside with expectation of new estate duty and inheritance tax which may be imposed. The budget rally would now take off on the back of improved global sentiment on G20 outcome.

Our markets are likely to open with an upward gap and trade higher. The state of the economy followed by the budget would determine the direction as the week progresses. The good news is that the monsoon has advanced significantly and it has by and large made up the deficit that the delayed onset had in June. The advancing monsoon and a near normal monsoon being predicted will cheer the market even though it did not do so on Friday. Trade cautiously in a volatile week ahead.