The events on 24 August are unlikely to be forgotten in a hurry. Even before the markets opened for trading there was a sense of foreboding. China had devalued its currency and the markets were going for a free fall. And despite the distance between the epicentre, Shanghai on the east coast of China and Mumbai on the West coast of India being more than 5,000 km, the resounding crash on Shangai impacted the Indian stock markets – as it did in markets across the globe. Opening at 26730, the market went on a free fall as panic bred on panic
with Fils continuing to press sales in a market unable to absorb the pressure. Fils effected a little over ?5,100 crore. But for the spirited action of the Dlls, which decided to play bull, and bought shares worth nearly ?2,750 crore, the market would have tanked even more. Something which the government could ill-afford as it was desperately seeking support from investors and institutions to ensure that its first major disinvestment of the year, Indian Oil, sailed through.
Besides the free fall, investors were unnerved by the rupee which
also shed value in unison to reach a low of 66.50 to a dollar. Fears of US interest reversal policy in September also struck the investors. Such was the frenzy that even the attempts made by the government to talk up the market did not manage to stem the fear.
While the IOC issue did get subscribed, thanks to Life Insurance Corporation, bailing it out once again, subscribing to nearly 86 per cent of the 24 lakh shares offered at the price of ?387. However, unlike in the global meltdown witnessed earlier in 2010, there were not many bulk deals across the board. On NSE, Credit Suisse (Singapore), sold 72 lakh shares of Gujarat Pipavav Port at ?173.06 a share to Kotak Mahindr^. It followed a further sale of another 40.89 lakh shares on 26 August when the markets had staged a recovery, at ?188. Morgan Stanley) Mauritius) sold 86.17 lakh shares of Federal Bank at ?60.28. Merrill Lynch sold around 15.71 lakh shares of Indian Cement at ?72.61 in the aftermath session. Citi group global also sold chunks of Indiabull Real Estate.
Only slight recovery
With Thursday being the F&o settlement day, markets staged a smart recovery with the Sensex gaining over 500 points followed by a small recovery on the last day of the settlement, on 28 August. The Sensex nevertheless remained in the red, losing 4 per cent over the month. Even as China was unwinding and grappling with the problems of reforming from a command and direct economy to a market led one, the slowing down in its economy also impacted several sectors across the world. The chief being metals where China is the biggest consumer and in many cases also a big producer. Steel was the worst hit with SAIL dipping below ?50 and Tata Steel losing more than 12 per cent in a session, just managing to stay above the ?200 mark, and JSW Steel dipped by 5 per cent. Hindalco which was already reeling from the global oversupply dropped to a low of 77 while ONGC in the face of the falling crude prices made a 51 week low of ?208. Several commodity prices dipped to
a 16 years low with export-led economies dependent on mineral exports like Brazil, Australia and Indonesia dipping more sharply.
The severity of the fall in the metals was reflected in the 14 per cent drop in the BSE metals index, as against a 4 per cent fall in BSE. While the market did stage a recovery towards the end of the fortnight, fear continues to stalk the markets. And not many Bravehearts are willing to step in the blood to go bargain hunting. Barclays in its emerging markets weekly report Keep your seat- belt fastened, says that any rebound will be difficult to sustain in the short run.
The US government’s decision to defer the rate hike, did see global markets recover to some extent. But one view is that this could well be a dead cat bounce with the pain in the markets, by no means, over. One could, if it is true, see lower tops and lower bottoms being formed over the next few weeks if not more. The RBI’s policy in September, when governor Raghuram Rajan is expected to lower the interest rates could provide a temporary reprieve and change sentiments. But the effect is unlikely to last.
Ultimately while hopes can buoy sentiments it is the corporate performance which will be the real game changer. And going by the results for the first quarter the trend does not seem too favourable. Care Ratings in its study on the corporate performance for the first quarter has observed that this is the third consecutive quarter to have shown lower
52 wk hi: 7989 (31/7/15)/ low: 7561 (27/8/14) Change: 8.4% Marketcap: 50,786 crore
200_ ^ Share price Turnover 8000
(7) (7 lakh)
52 wk hi: 7266 (12/9/14) / low: 746 (25/8/15) Change: -67% Marketcap: 1,180 crore
sales and negative growth in PAT. Banking sector continues to remain buffeted by NPAs and higher provisions have seen its PAT decline by 7.4 per cent. The sector continues to be bogged by NPAs. The gross NPA ratio has increased from 3.97 per cent last June to 4.63 per cent in June 2016.
Some hope remains
However, even during the crisis month of August, private sector banks are being bought by discerning investors. Induslnd Bank which saw its price rise by 8.4 per cent over the month, was successful in raising ?5,081 crore through a preferential cum QIP issue made at a price of over ?850. The bank which has a higher exposure to car loans is expected to gain, in case RBI lowers interest rates in September. Other companies which saw a rise over a month include Amar Raja Batteries, DLF and
52 wk hi: 7439 (10/8/15) / low: 7275 (28/8/14) Change: 6% Marketcap: 7,429 crore
500 4 Share price Turnover 1000
27 Jul – 27 Aug 2015
52 wk hi: 7491 (16/7/15) / low: 7185 (26/8/15) Change: -46.3% Marketcap: 228 crore
Great Eastern Shipping.
There were certain shares which were moving southwards even before the crash. TRF, a Tata group company engaged in material handling equipment, saw its share prices tank to a 52 weeks low of 7185 in the last week of August from a 52 weeks high of 7491 reached a month ago. Investors were a little apprehensive after the company postponed the board meeting four times in a row for considering the annual accounts. As of now the meeting is to be held on 31 August.
Amtek Auto saw its share prices dip to a third of its price of 7150 a month ago after it was dropped from F&o in August. The promoters admitted that there was a temporary mismatch of funds, promised to infuse 775 crore. An EGM held on 24 August also authorised the board to issue shares to promoters besides permitting it to make a fresh issue of securities.
Good news on the corporate front included Tube Investments securing a brand licensing rights agreement with Ridley bikes of Belgium. Besides India, the company will also be able to market the premium cycles in Sri Lanka, Bangladesh, Nepal, Bhutan and Myanmar for 33 years. The company’s shares have notched a gain of 720 to 7401 in the last one month.
Where every crisis does throw up opportunities to buy for long term investors, one should be patient to buy in instalments – especially as the bottom is unknown.
♦ DAKSESH PARIKH firstname.lastname@example.org