The market moved both ways last week indicating that the sentiment is made up of mixed feelings. As far as fundamentals and guidance are concerned, their harvest is over; it’s now the play of sentiment alone. For a change, even the headlines have changed from politics to triple talaak giving a much needed breather to readers. Investors are evaluating the unfolding of fundamentals in 2016, 2019 and beyond. The way the polls swing during the assembly elections in M.P., Gujarat, Karnataka and Rajasthan is very important as it will be considered to be the litmus test for the BJP in particular and the NDA in general. Little wonder, Amit Shah, President of BJP, is more active and more in the news than Prime Minister Narendra Modi (NaMo).
The Infosys debacle at Sikka’s resignation is a lesson for investors as to what can happen to a market leader if the founder is possessive about his company even if he is reduced to a minority shareholder. It is believed that the boardroom battle-lines are drawn and the Infosys founder, Narayana Murthy, is meeting all segments of stakeholders to seek their support.
The erosion in Infosys’ market cap is considered the worst ever and has led to a jump in liquid assets to market cap ratio of 19.5%. During its golden days, it never exceeded 5% to 7%. Such a high liquid to market cap ratio will affect investors’ interest despite the announcement of an attractive buy-back. Well, Infosys can seek consolation in Wipro’s liquid to market cap ratio at 26%. But then, both their sizes and business outlooks are incomparable.
SEBI as a proactive regulator is dissecting the Infosys transactions to detect any foul play. In its bid to lighten the grip on shell companies, the Regulator is seeking strict disclosures and compliance. It now wants to link your Aadhar card to your demat accounts and has set the deadline at 31 December 2017. This will, in a big way, unearth unaccounted sums parked in securities and may expose money laundering in the stock market.
Equity markets in USA and the West seem to be losing patience with Trump’s policies. In the wake of Banon’s departure, markets gave up whatever little optimism they shared. This may raise bearish risks on all risky assets in general. People like Colin and White House Chief of Staff, John Kelly, keep the hope alive that there are enough adults in Trump’s Oval office. The world closely observes every single move out there.
At home, the government is once again making efforts to tackle the NPA issue and give teeth to the insolvency and bankruptcy laws. Sooner than later, the government may come out with a scheme of merger of PSU banks in a bid to
consolidate their synergies. Rather than the government pushing such proposals down the throat of PSU banks, it would have been prudent for the board at each bank do some thinking.
The Nifty is set to be reconstituted if the revision in guidelines governing such reconstitution is to go by. India Index Service and Products, a NSE group firm, is working on it. Such newly defined guidelines will be made applicable from September 2017. According to the new guidelines, the Nifty Fifty shall come from the Nifty 100. For inclusion in Nifty, the security should have traded at an average impact cost of 0.5% or less during the last six months. Companies will be included in the index if their free float market cap is 1.5 times the free float market cap of the smallest constituent in the respective index.
Changes are always welcome on the bourses and more so if they come during the “Shree Ganesh” and “Michami Dukkadam” days.