Markets on a roll but up your guard

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BY ARUN KEJRIWAL
Markets were on a roll last week and gained on four of the five days of trading. They just did not gain, they galloped. The BSESENSEX was up a massive 1,863.14 points or 5.75 per cent to close at 34,287.24 points. NIFTY gained 561.85 points or 5.86 per cent to close at 10,142.15 points.
The broader indices like BSE100, BSE200 and BSE500 gained 5.71 per cent, 5.84 per cent and 6.07 per cent, respectively. BSEMIDCAP gained 6 per cent and BSESMALLCAP fared even better gaining 8.84 per cent. Circuit filter limits were revised from 5 per cent upwards to 10 per cent and 20 per cent in many scrips on Friday and that helped the Smallcap and midcap indices outperform the benchmark indices.
Dow Jones had yet another week of big gains and was up a massive 1,727.87 points or 6.81 per cent to close at 27,110.98 points. With this gain, the Dow Jones is a mere 5% down since its opening level of 1st January.
In comparison, the BSESENSEX is almost 7,000 points or 16.88 per cent lower than the corresponding period of 1st January 2020. NIFTY is lower by 2,026 points or 16.65 per cent. The Indian Rupee gained 4 paisa or 0.05 per cent to close at Rs 75.58.
Reliance Industries which had in the last week completed its rights issue subscription was oversubscribed a massive 1.589 times. The issue of 42.26 cr shares received subscription for 67.16 cr shares. Details of the allotment are yet to be made public. While the issue remains a success, it leaves a sour taste for the small shareholder who has been the backbone of success for the Dhirubhai Ambani culture of small shareholder.
This category of investor who in number were 19.80 lac shareholders of the roughly 25 lac public shareholders, holding shares in the category of 1-500, seem to have just missed out on the issue. The total number of people who have applied for the issue is 5,55,277 applications.
This is roughly a little more than a fifth of the number of public shareholders. This category as per balance sheet of 2018-19 held an average of 94 shares and were thus entitled to apply for six shares as rights. One has for the point of convenience ignored the people who held shares in physical form.
What went wrong that such a large number of shareholders missed out? No aspersions on the quality of the issue or the price at which the shares were offered. It is the convenience of the people and the wrong understanding of the people behind the issue that these 20lac investors had the wherewithal to have a printer/scanner at their disposal in these days of lockdown.
With umpteen number of advertisements released in multiple newspapers on many days, why did the company not feel it appropriate to publish a facsimile of the one page of the application form as part of the advertisement, beats me.
People would then have taken a cut-out of the same, filled it and submitted to the bank. Very poor understanding of the shareholder and causing heartburn to this large population of shareholders who are at the bottom of the pyramid. God forbid if in the present mood of the markets if share price of Reliance moves up another 10 per cent and touches say Rs 1,750, the shareholder will feel a notional loss of Rs 500 per share. These shareholders would then vent their ire on the management when the virtual AGM is held.
While SEBI, the regulator, has brought in many innovative measures to tackle the hard and difficult times that the nation and the world is passing through, it must take this as a test case and analyse the difficulties of the bottom of the pyramid shareholder and ensure that the policy and guidelines are inclusive in nature and not exclusive. Technology should benefit not be the cause of loss or heartburn.
COVID-19 continues to hog the limelight and the number of cases globally have moved up to 69.93 lacs, with 4.02 lac deaths and 34.19 lac patients recovering. India which was a slow starter is fast playing catch up and we have moved up to the 6th largest number of cases at 2.47 lacs with 6,946 deaths and 1.19 lac patients recovering. Since last week, the world has seen an addition of 8.32 lac cases, 29,400 deaths and 6.81 lac people recovering.
In India, the number of new cases has increased by 64,500 with 1,760 deaths and 32,300 people recovering. Unlocking of the country is happening from Monday other than the containment zones and there is every likelihood that cases could spike but herd immunity is a must for a virus which is here to stay. We need to build the immunity from the same and ensure better standards of hygiene and improve one’s own health.
Markets in the last two weeks have gained just under 12 per cent and give an impression that the economy is roaring. Data however speaks in a completely different language and does not match reality.
The unfortunate part is that over the last few days, a left-out feeling has started creeping into investors and this could cause the rally to become wider and see more market participation. It is not my intention to make readers nervous or suspicious but cautious to the fact that one must buy only quality. Do not buy because something has not moved and is likely to move. You may turn out to be right for the moment, but when things reverse, heaven help.
The strategy should be to book profits on any flare up in the benchmark stocks and allow the smaller and midcap stocks to play catch up. Be cautious in what you buy and be nimble footed at the first sign of danger. Volatility will further increase making life that much more difficult. Tough times are still here and realty check is completely different from what market indices indicate.
Stay cautious and trade with extreme caution.

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

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