Be cautious & trade with broad range deals
The only thing being talked about in the upcoming budget is the possibility about a big hike in the outlay on infrastructure spending. This outlay would have a multiple effect on creating jobs and also increasing the multiplier effect in State spending and helping create a better infrastructure
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The period (January 13-18) saw markets gain on two of the four days, remain flat on the third and fall sharply on the fourth day. The fall on Tuesday makes one believe that the correction has begun and it could gather momentum in the coming days taking it to levels of 17,600 or there about in the coming days. Further, both the key indices fell one per cent on Wednesday. On the BSE Sensex the correction could bring us closer to 59,200 -59,300 levels. The BSE Sensex lost 395.18 points or 0.65 per cent to close at 60,754.86 points while Nifty lost 99.30 points or 0.55 per cent to close at 18,113.05 points.
On Friday, one saw markets trade significantly lower with BSE Sensex down intraday by as much as 500 points and recover almost everything and Nifty lower by as much as 140 points and recovering everything. On Tuesday, BSE Sensex lost 550 points and Nifty lost 195 points on a net basis. Midcap and Smallcap which have been outperforming bore the brunt of selling and lost significantly more.
On Tuesday, onesaw markets lose across Asia, Europe and even Dow Jones futures were down around 300 points. Monday was a trading holiday in the US. While the budget announcement due on February 1 is eight trading days away, the correction may last for another five-six days going forward.
In primary markets, the first IPO for calendar year 2022 has been announced. AGS Transact Technologies Limited is tapping the capital markets with its offer for sale of 3,88,57,141 equity shares in a price band of Rs 166-175. At the top end of the price band, the issue would raise Rs680 crores. The issue opens on Wednesday (January 19) and closes on Friday (January 21). Probably in the next couple of days one may expect a flurry of issues being announced.
Markets have been on an upswing since the bottom was made on December 20. The levels were 55,100 on BSE Sensex and 16,400 on Nifty. The rally from these levels was very strong and rose close to 5,000 points on BSE Sensex and 1,800 points on Nifty in just under a month. A correction was more than overdue and that seems to have started. Markets were literally range bound at the top for the last three or four days and seemed to be in the stage of distribution.
The only thing being talked about in the upcoming budget is the possibility about a big hike in the outlay on infrastructure spending. This outlay would have a multiple effect on creating jobs and also increasing the multiplier effect in State spending and helping create a better infrastructure, roads and development for all concerned. Steel and cement industry would be big beneficiaries. Besides this it is already speculated that to match with the PLI scheme introduced for many industries, there would be increased focus on capital expenditure and schemes to promote the same.
Coming to the period (January 19-25), experts forecast markets correcting and then getting ready for the final pre-budget rally. Incidentally markets would see a holiday on account of Republic Day on Wednesday (January 26), followed by expiry of January futures. The trading strategy should be to allow markets to correct and buy into sharp dips in the ongoing correction. If during the correction, there are rallies, one should sell and benefit from the same. It's time to be cautious and trade with a broad range in mind.
