Stocks

Amid bear’s roar, are you listening to these silent voices?

KS Badri Narayanan Chennai | Updated on March 21, 2020 Published on March 20, 2020

Insiders’ buying, a slew of buybacks, peaking volatility hint that a turnaround is nearby

Equities and other asset classes across the globe were shaken by bears in the last couple of weeks. Circuit breakers were set off in several markets from the US to Asia, multiple times within a few days even as central banks and governments are on a war-footing to stem a public health crisis triggered by the coronavirus outbreak.

Market-wide circuit breakers were triggered in Manila, Jakarta, Seoul and Karachi. Shares in the Philippines tanked as much as 24 per cent after resuming trading from a two-day shutdown. The situation is no different in India. After 12 years, Indian benchmarks too hit the lower circuit on March 13. FPIs have been continuously pulling out from Indian stocks. According to NSDL, in March alone they have pulled out almost ₹44,000 crore. In fact, for 2020, their total withdrawals stood at ₹50,000 crore, explaining the mayhem in March.

BSE Market capitalisation slumped to ₹100-lakh crore from ₹145-lakh crore as of 2019-end.

Despite two months being over, there is no sign of the coronavirus giving up its vigour.

Insiders’ buying rise

While these negative news reports absorb most of our attention, there are some under-the-radar events in the market too that could be signalling that we are at the end of dark tunnel.

First and foremost, promoters and top executives of several companies have been accumulating shares in some companies over the past few days. (Companies where promoters or designated persons bought shares and informed the exchanges on Friday alone were: Asahi Songwon, DB Realty, Diamines Chemicals, Dalmia Bharat, Goldiam International, Harrissons Malayalam, Hubtown, JK Lakshmi Cement, Motilal Oswal, Navabharat Ventures, National Oxygen, Srikalahasthi Pipes, Thirumalai Chemicals and UFO Moviez).

N Chandrasekaran, Executive Chairman, Tata Sons Pvt Ltd, bought ₹6 crore worth shares of Tata Communications, Tata Chemicals and Tata Investment Corporation.

Despite the hindrance of the 20 per cent buyback tax, a number of companies, especially in the last two weeks, have either announced buyback plans or scheduled their board meetings to consider the proposal. Among them are Sun Pharmaceuticals, Emami, Kalpataru Power Transmission, Sterlite Technologies, Ramkrishna Forgings, Aster DM Healthcare, Supreme Petrochem and Granuels India,

Volatility index peaked?

Volatility index or VIX seems to have peaked too. India VIX, which rose to high of 73.34 on Friday, closed lower at 67.10. The fear gauge touched a high of 92.53 on November 14, 2008, when the bear market was at its peak. Post that peak level, the market gave handsome returns for successive years, except on a few occasions. After the huge falls, even the global markets have started moving in a narrow range with wider intra-day swings.

Once the coronovirus threat is tamed, efforts will intensify across countries for massive stimulus measures to boost the economy. Already the US, the UK, Canada and Europe have announced large economic and liquidity measures.

 

India’s Prime Minister has announced the setting up of an economic task force to revive the already sagging economy. Given all these signals coinciding, as Motilal Oswal said in an interview to BusinessLine, it does appear that the ‘bottom is fast approaching’.

Published on March 20, 2020
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