Trade Cautiously In Overheated Market

The. The period would end on the eve of September futures expiry, which would happen on Thu (September 26). Very clearly to predict what would happen tomorrow is indeed dangerous

The period gone by saw four listings on the main board with three of them happening on Monday (September 16). The first of the lot was Bajaj Housing Finance Ktd, which has created a new record in subscriptions. The issue was for a size of Rs6,560 crore and raised a whopping Rs3,24,022 crore through 90.73 lakh applications. No previous issue has received so much money or so many applications ever before

The September 12-18 period saw benchmark indices hit a set of new intraday and closing highs. Interest rates have been cut by the ECB and the US Fed would have done so on Wednesday night, and the outcome would be known as you read this article. This cut is of special importance to the US and global markets. While a cut in the US is a certainty, the impact on markets post the cut is causing confusion amongst traders. It’s therefore best to leave it at that and allow markets to react post the cut based on what markets actually do.

BSE Sensex gained 1,425.04 points or 1.73 per cent to close at 82,948.20 points, while Nifty gained 459.05 points or 1.84 per cent to close at 25,377.50 points. The intraday high made on Wednesday was at 83,326.38 points and the closing high was at 83,079.66 points on BSE Sensex. On Nifty similar levels were at 25,482.20 points on intraday and at 25,418.55 points on closing basis. Markets gained on three of the four sessions. Wednesday was a mixed day where in the initial stages it alternated between positive and negative. It finally closed in the negative.

The period gone by saw four listings on the main board with three of them happening on Monday (September 16). The first of the lot was Bajaj Housing Finance Limited, which has created a new record in subscriptions. The issue was for a size of Rs6,560 crores and raised a whopping Rs3,24,022 crores through 90.73 lakh applications. No previous issue has received so much money or so many applications ever before. This shows the liquidity in the markets, euphoria towards IPOs and the craze that people have for more making a quick buck through an IPO.The share which was issued at Rs70, debuted at Rs150 and closed at upper circuit of Rs164.99 on BSE on Monday. Tuesday was a similar story with the share closing again at upper circuit of Rs181.48. Wednesday saw profit taking and closed at Rs173.04, a total gain of Rs103.04 or 147.20 per cent.

The second share to list was Kross Ltd, which had issued shares at Rs240. The share debuted at the issue price on Monday and then gained to close at Rs251.50, a gain of Rs11.50 or 4.79 per cent. The share lost ground over the next two days and closed at Rs237.56, a loss of Rs2.44 or 1.01 per cent.

The third share to list on Monday was Tolins Tyres Ltd, which had issued shares at Rs226. The share debuted at Rs227 and closed on day one at Rs238.30. the share hit lower circuit on Tuesday and Wednesday and closed at Rs216.47, a loss of Rs9.53 or 4.21 per cent.

Shares of PN Gadgil Jewellers Ltd listed on Tuesday (September 17). The issue price was Rs480 per share and the debut price was Rs834. The share closed on Tuesday at Rs791.30, a gain of Rs311.30 or 64.85 per cent. On Wednesday, one saw profit taking and the share closed at Rs771.30, a gain of Rs291 or 60.68 per cent. Monday when shares of Bajaj Housing listed, one saw a very strange event happening in the markets. While shares of Bajaj Housing were locked at the upper circuit of Rs165, a gain of 135 per cent, shares of eight other companies from the housing finance sector lost between 7-9 per cent. Surprising as it seems and even two days after the event there is no clarity on why this happened. Bajaj Housing is an existing player in the business verticals and there would be no impact on market share of the company or its competitors as a result of this listing. Strange but the market teaches something new every time. Incidentally, one has seen some recovery in the prices of the peer set even as shares of Bajaj Housing fell on profit taking.

The September 19-25 period ahead would open post the US Fed decision on interest rate cut. Expect markets to open with a gap which could be positive or negative. The period would end on the eve of September futures expiry, which would happen on Thursday (September 26). Very clearly to predict what would happen tomorrow is indeed dangerous. Best to allow the event to play out.

The simple strategy for the week ahead would be to decide on Thursday morning post clarity on Fed rate cut and how US markets react. Being adventurous will not help. Trade cautiously in a market which is looking tired and overheated. Trade cautiously.

(The author is the founder of Kejriwal Research and Investment Services,

an advisory firm)