Markets hint to recovery in the coming week

By Arun Kejriwal

A week can be a very long time and last week was a classic example. It began with the markets falling very sharply and the BSESENSEX losing just about 4,000 points on Monday. Tuesday saw the markets trading in a comparatively narrow range of just about 800 points on BSESENSEX. Tuesday night was also the time when Prime Minister Narendra Modi announced a 21-day lockdown beginning 12 midnight of Tuesday the 24/25th March. Wednesday saw markets gain 2,000 points. Thursday saw the FM announcing measures to ensure that the poorest of poor had food and money to tide over the present crisis.

Markets gained 1,400 points on the BSESENSEX. Friday saw RBI announcing rate cuts and measures to benefit the banking system and customers. Markets after gaining initially closed with minor losses of 130 points on BSESENSEX.

The week closed with losses of 100.37 points on BSESENSEX or 0.34 per cent at 29.815.59 points. NIFTY closed with losses of 85.20 points or 0.97 per cent at 8,660.25 points. The broader indices saw BSE100, BSE200 and BSE500 lose 1.52 per cent, 1.92 per cent and 2.23 per cent respectively. BSEMIDCAP was down 5.42 per cent while BSESMALLCAP was down 6.09 per cent.

It would be interesting to observe that BSESENSEX made an intraday low of 25,880.83 points on Monday and 25,638.90 points on Tuesday before staging a sharp recovery for the week. Similarly, NIFTY made lows of 7,583.30 points on Monday and 7,511.10 points on Tuesday.

The intraweek highs made on Friday was 31,126.03 before the profit taking and correction post RBI policy. Similarly, NIFTY made a high of 9,038.90 points. In normal circumstances I would have stuck my neck out and said that this was a bottom that we have witnessed but after the setback 2 weeks ago would now say that the signs indicate that probably a bottom has now been established.

The Indian Rupee after a wild week, managed to recover 29 paisa or 0.39 per cent to close at Rs 74.89 to the US dollar. Dow Jones had a torrid week and managed to gain 2,462.80 points or 12.84 per cent at 21,636.78 points. During this period on has witnessed Dow ending the day with gains of 800-1000 points and futures opening with losses of over 600 points.

Such has been the volatility that it has changed the trading atmosphere and brought in unheard of uncertainty. March futures expired on expected lines and the series lost 2,991.85 points or 25.72 per cent to close at 8,641.45 points. While there was recovery during the week it just recovered the intraweek losses.

In recognition of the services of the healthcare sector, the government has announced a health insurance of Rs 50 lacs per person involved in the treatment of Covid-19 whether it be doctors, nurses or support staff. This would boost the morale of those people who are giving their best for the treatment of the pandemic.

RBI advanced its monetary policy review meeting to be held from March 31 - April 3 and instead held it from March 25- 27. On Friday it announced a cut in Repo rate by 75 basis points from 5.15 per cent to 4.40 per cent. CRR or cash reserve ratio was cut by 100 basis points 3 per cent.

Reverse repo rate was cut by 90 basis points to 4 per cent. In a very significant move, it announced that lending institutions can allow 3 months moratorium on EMI's. Deferment on loans and interest repayments will not be classified as defaulters and will not impact credit history of borrowers.

The FM is expected to announce further measures which would affect positively the SME and MSME segments in the coming week. One announcement which is being looked for is the change in the financial year which would end on 31st March. With complete disruption having already happened it would be in the fitment of things that the same be shifted to end on 30th April at the bare minimum or ideally 30th June. This would ensure better compliance and convenience for all stake holders.

Covid-19 has gripped the entire world and at last count had already claimed 30,900 deaths and over 6.65 lac affected patients. We need to understand that the advanced countries in the US and Europe are having far better resources and infrastructure to tackle Covid-19 than we have in India. The complete lockdown is in our national interest and it would help in containing the spread of the virus significantly. Paying heed to the request of the Prime Minister and following the shut down would help you and therefore the nation.

Coming to the markets, we have seen complete mayhem so far in the last five weeks. The time to do some repair, some rebuilding and some shopping has probably come. Look at some damage control to the portfolio by topping up blue chips. The path to recovery will be slow, tedious and bumpy. With a reasonable amount of comfort, it could be said that barring a major setback on the Covid-19 front, things should limp back toward partial normalcy.

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

Source: IANS