Markets hit turbulence Tuesday and from the inside it seemed that it was mostly because of an expected day of taking the floors out of the markets with no hedges holding longs or maybe exits were well and truly done midweek last week. However, the way markets kept falling on Friday and Monday together, it was mostly egress of air bubbles in expectations that could be much more dangerous further on, as markets still looked to pressure RBI and guv Rajan for a rate cut, which India is nowhere near with WPI at 3.67% but CPI still near 8% at 7.80%
There is bad news for the Rupee ahead as again at cycle lows for Brent, India seems to be getting off at a deal no better than earlier with the floor price by OPEC seen at not lower than $95, putting a lid to Brent which moved up from lows of $97 last week but still seems to have more downside with India and China pushing for better prices from the Arab world and US happier with its own production to even cut down the remaining less than 1 bln BPD imported from the middle east
A key learning sold puts are no defense in a new market zone, and bulls if any serious ones are aboard to support broker sentiment, would need a way out as one understandably wants to stay away from future bets in a new market as well. The exit of the range trade made a down move possible but as of now one does not see any instrumental players in the market claiming the spoils as I expected at least the markets to recover from 8050
IDFC had a n easy enough time, getting a Rs 1000 Cr QIP completed as brittle small and midcaps saw a big red mark on Monday with many hitting the board at 6-8% lower including Praj, Punj Lloyd and Magma. While that was on, JP Associates scrip steadied ships at earlier lows of 35. JP Associates completes the classic wind down of the trading scrip with its promoters also exiting, like Kingfisher a couple of years earlier took 5 laborious long years to complete and will eventually also hit lower levels in the mid 25s. The Firm (Menaka Doshi on CNBC TV 18) had a great piece on the USL INR 5000 crore White & Mackay and other holes in its Balance sheet which I believe ( courtesy SES) includes a couple of subsidiaries in the Bahamas
The worst of the markets on Monday was the attribution of the lack of interest rate cut on cyclicals like Banks as one expected the mature Bank trade to stay the course in the continued bull run, which will apparently continue from here as markets use the new ‘old range’ gained from the fall and build up stamina and Indian markets return in global favour. Banks and Auto companies continue to lead the market nose while Pharma holds the market during the consolidation, the correction from Friday deepening probably because traders never want to sit out in a one-sided bull market and bull proponents though seemingly corrected on choice of a lot of speculative trades still looked at Easy Modi’s here type of rally legs from the new bank rate – investment cycle and small and mid cap capex plays both of which were bad moves again.
In unlisted business, Snapdeal (ETnow plug for Kunal Bahl) and potential CM Harshavardhan seem to be winners going in even as markets would probably welcome more corporates to be tied in with the Modi rath to India’s glory in the coming decade or two than just one Adani.