Market movement and global cues becoming worrisome

The week gone by had plenty of action and the first two days in particular shook the market. On Monday, BSESENSEX lost 1,747 points while NIFTY lost 532 points. On Tuesday, they gained 1,737 points on BSESENSEX and 510 points on NIFTY. What happened? Why the loss and why the recovery? No war actually happened and there was no pullback either.

The situation still remains the same and global markets are sitting on a bombshell. Anything can happen. Markets lost in four of the five trading sessions. BSESENSEX lost 319.95 points or 0.55 per cent to close at 57,832.97 points while NIFTY lost 98.45 points or 0.57 per cent to close at 17,276.30 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.71 per cent, 0.94 per cent and 1.17 per cent respectively. BSEMIDCAP was down 1.98 per cent while BSESMALLCAP lost 3.29 per cent.

The Indian Rupee gained 72 paisa or 0.96 per cent to close at Rs 74.66 to the US Dollar. Dow Jones lost on four of the five trading sessions and closed the week with losses of 658.29 points or 1.90 per cent to close at 34,079.18 points.

In primary markets news there was just one listing which happened last week. Shares of Vedant Fashions, which was entirely an offer for sale, saw its shares close at Rs 934.85 against an issue price of Rs 866 on listing day. The share gained 7.95 per cent. By the end of the week, the share lost some ground and closed at Rs 906.75, a gain of Rs 40.75 or 4.70 per cent.

No issues have as yet announced their intention of tapping the capital markets even though preparations for many are under way.

LIC is working feverishly towards completing its process and hitting the markets in Mid-March. They have a new bucket for policyholders and have a reservation for them in the proposed offer for sale. They have kept aside up to 10 per cent of the issue size for this category. They would be offering a discount to applicants in this category as well. On close perusal of the DRHP, one also gathers that the present public issue of 5 per cent is only once. Going forward when they dilute the government holding further, they would choose the mechanism available through the stock exchange and do it through the window on the exchange. This would eliminate the need to file a DRHP and go through the cumbersome process of finalising a document and so on.

This also implies that the policyholder bucket would not be available hereafter. This makes this window or bucket an interesting one and probably a once in a lifetime opportunity.

The going on in Indigo, the airline company, seems to be bad news for the company and its investors. Co-promoter Rakesh Gangwal who had apparently sorted out his dispute with Rahul Bhatia, has decided to quit the board. He has also informed that he plans to reduce his holding over the next five years in the company Interglobe Aviation Limited. This effectively means there will be a constant supply of paper on the counter and may keep prices subdued going forward.

Coming to the markets and the current global situation, it makes markets no different than what they were last week. Markets after a wild first two days are back to remaining circumspect and tentative. There is a high degree of uncertainty globally. FII’s have not stopped selling in the cash market and there are no definitive indications that it would change in the near future. The stand of the leading countries in the war like situation involving Russia, Ukraine and the USA, is unchanged. NATO and other countries are all calling for restraint but every passing day seems to be adding to the tension. No one wants a war but as of now no one knows who will blink.

The unfortunate part is that oil prices have risen significantly and even if the situation in Europe normalises shortly, the oil situation may take much longer to do so. In that period no one knows how markets will pan out. US markets are struggling with issues of their own bordering on inflation and rising interest rates due at the next FED meeting.

What should investors do in our markets in the coming week? The previous lows made on the BSESENSEX and NIFTY at 56,409 and 16,836 points have been broken and new lows of 56,295 points and 16,809 points made. While this itself is negative it still leaves us with some hope. The next lows were made on December 21 at levels of 55,132 points and 16,410 points. While these are quite far, they become significant levels for any support on the downside. Currently we can expect markets to remain in a trading zone and wait for global cues from Europe. We also have February futures expiring on Thursday the 24th of February. The current level of NIFTY sees the bulls have a lead of 166.15 points or 0.97 per cent. This is not significant and one down day could make the series neutral or negative.

The strategy for the week will be to continue to sell on rallies and buying only on really sharp dips. It also makes sense to buy only from the large cap stocks and refrain from trading in midcap and Smallcap stocks for the time being. Keep your fingers crossed on the war and war mongering events currently worrying the markets.

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


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