It’s Time To Focus On Large-Cap Space Amid Anticipated Volatility

The March 13-19 period was dramatic and volatile. It consisted of just four sessions, with Friday being a holiday for Holi. Monday onwards saw a dramatic turnaround in the markets with a sharp rebound in the US markets on Friday and coincidentally after Holi as well. Probably the advent of Spring and the fact that investors were tired of seeing red on their screens helped in the color changing to green. All of this saw BSE Sensex gain 1,399.05 points or 1.89 per cent to close at 75,449.05points. Nifty gained 437.60 points or 1.95 per cent to close at 22,907.60 points. Markets gained on three ofthe four trading sessions and lost on one.

Dow Jones had an extremely choppy and volatile period. The fear of 2ndApril when Trump would announce the tariffs and initiate a new type of world war is looming large. There are movements of 300-500 points on a daily basis, indicating nervousness. Dow gained on two of the five sessions and lost on three. It was up 147.83 points or 0.36 per cent to close at 41,581.31 points.

Markets have managed to cross a major resistance level in the very first attempt. They have successfully crossed levels of 22,800-22,900 on Nifty and 75,000-75,200 on BSE Sensex. This took close to 15-16 trading sessions and during achieving this level they made lows of below 22,000 and 72,600 on the indices respectively. At this point of time, one can say with some amount of certainty that the worst seems to be behind us, in the immediate short term. How long could this nice feelinglast, not sure. FPIs are sellers and on Tuesday there was sharp short covering. Will this be a new trend or just a one-day affair, is uncertain and unsure. What however is more dependable, is the fact that valuations over time in the large-cap has improved and are certainly cheaper than what they were. As far as the Small-cap and mid-cap space is concerned there is improvement but nocomfort. Safety lies in the large cap space alone.

Coming to the March 20-26 period ahead, we would be approaching the end of the financialyear and March futures. March futures would end on Thursday (March 27). This would also be the last expiry to happen on a Thursday. Henceforth, Nifty monthly futures would expire on the first Monday of every month and the first such expiry would be in May. The period ahead also has a trading holiday on March 31, which would make the period a short four-day period. This period would have the all-important 2ndApril in the midst of it and there could be volatile moves on that day.

The strategy for the period ahead would be to continue to invest or trade in the large-cap space. Defensive sector pharma and the evergreen Banking space look the best of the lot at current times. This is from the large-cap space only. A very select group of mid-cap and Small-cap stocks have become attractive after a sharp fall in prices. This could be classified as high risk and is meant onlyfor the market savvy person. For all others stick to large-cap stocks only.

Expect markets to find resistance at levels of 23,050-23,100 points on Nifty and at 75,900-76,050 points on BSE Sensex. These levels need to be crossed and then sustained, if the present rally has to have further legs. Immediate support would be at 22,750-800 levels and at 75,000-75,150 levels. If these are broken next levels would be at 22,450 around and at 74,100 levels. Volatile times ahead with lot of emphasize on the announcements on 2ndApril. Trade cautiously.

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

an advisory firm)