Still clueless over market direction

The period under review from March 10-16 continued to see extreme volatility. While markets were on a recovery mode and gained on four of the five trading sessions, intraday volatility was high. On Tuesday, markets opened positive and then fell quite sharply. The one reason that could be attributed to it is the continuing hostilities between Russia and Ukraine which has completed three weeks. BSE Sensex gained 2,169.32 points or 3.82 per cent to close at 56,816.65 points while Nifty gained 630 points or 3.71 per cent to close at 16,975.35 points.

In primary market news, Ruchi Soya, has informed the exchange that they have filed their RHP for their upcoming Follow-on public offer to raise Rs4,300 crores. The issue would open on Thursday (March 24) and close on Monday (March 28). The stock price had closed at Rs803.15 on Friday at close of market. Post this announcement, the share in the course of three days has moved to Rs1,071.25, gaining Rs268.10 or 33.38 per cent. In all probability, the price band would be announced on Monday (March 21). There would be a discount to the closing price of Thursday which would form the price band.

With just about two weeks to go before the current financial year ends, no other primary market issue has informed its readiness to hit the market in this financial year.

The US Fed meeting is on and would announce its outcome on the expected interest rate hike at the end of Wednesday. With record inflation in the US and the added effect of the Russia-Ukraine conflict not helping matters, rate hike happening is already factored in. How markets react post that and more importantly the minutes of the meeting which would give a key to future rate hikes would be the key going forward.

Coming to the war situation, while one would have not expected it to last so long in the first place, reality is that it is already three weeks old. While negotiations seem to be happening, a couple of things have become very clear. There is no way that Ukraine would become a member of NATO and therefore the possibility of Ukraine airspace being declared a no-fly zone simply cannot happen. Almost all the major cities of Ukraine in a 180-degree arc from Russia have been encircled by Russia and leave little or no option for Ukraine, but to negotiate. Commodity prices have shot through the roof even though crude prices are back below the 100-dollar mark. Leave alone the disruption that has been caused.

Indian-oil (IOC) and Russia are negotiating a large crude oil deal and once the first happens, there would be many more such deals taking place. With markets uncertain and super volatile, it makes sense to play them cautiously.

Coming to the period ahead 17th March to 23rd March, there is a trading holiday on 18th March. This would leave us with one trading session post US Fed meeting and then a long holiday. One cannot be sure what would happen in the three-day holiday on the war front, forcing people to lighten their positions before the long weekend begins. The best strategy would be to continue selling on sharp rallies and buying on sharp dips from the large cap space. We are coming to the year end and there would be some amount of NAV propping happening in the coming couple of weeks. This could be an opportunity for investors to sell some shares where they are stuck because of price damage.

Just because markets have rallied doesn't mean we are out of the woods as yet. FIIs have not stopped selling as yet even though they did a token buying of Rs311 crore, while domestic institutions were buyers of Rs772 crore for the day. Whether this is an indication of the new trend or what, is difficult to predict at this point.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)