Breakdown in the benchmark indices looming large

IT was a short four-day week, but the volatility and the market movement showed the underlying weakness. BSE Sensex lost 838.26 points or 1.76 per cent to close at 47,705.80 points while NIFTY lost 208.40 points or 1.46 per cent to close at 14,296.40 points. The fall however, does not denote the picture of what actually happened in the markets. Trading began on Thursday and saw the markets gain. Friday saw markets gain but much less than Thursday.

Monday saw blood on the streets with markets losing considerable ground, but then recovering to reduce the losses substantially. Tuesday saw markets open strong, but then surrendering not only the day's gains but coming quite close to the previous day's lows. This sharp movement confirms the inherent weakness in the market place and would continue to be the cause of nervousness going forward.

To put the above in perspective through numbers, the low of the day on BSE Sensex on Monday was 47,362 points, a fall of almost 1,500 points. The close was 47,949 points, a recovery of 600 points from the low and a net loss of 900 points. Similarly on NIFTY the low was 14,191 points, a loss of 425 points. The close was 14,359 points, a recovery of 170 points or a net loss of 250 points. Tuesday saw markets open very strong and touch a high of 48,478 on BSE Sensex while it was 14,520 on NIFTY. The lows were 47,428 and 14,207 respectively. These levels indicate that the entire recovery on Monday and gains of Tuesday morning were virtually reduced to zero. Markets did recover from the lows after almost testing the previous day's lows and close at 47,705 and 14,296 respectively, but losing on Tuesday.

Markets are certainly not out of the woods and a breakdown in the benchmark indices is looming large. Even as this article is being written there is fear on the streets that Maharashtra may impose complete lockdown with effect from today. Based on this expectation, SGX Nifty is down about 240-260 points which would take Nifty closer to 14,050 and create a new low over the last three to four months. This weak opening would set panic amongst traders when market opens on Thursday. To add to the current situation, FPIs have been sellers over the last few sessions even while Domestic Institutions have been buyers. The situation is certainly not the best and there is plenty of nervousness amongst players.

Further results season is on and so far, results declared have been by and large encouraging. Going forward, the average results and the not so good ones are all left which will add to the woes of investors. Once the levels of 47,350 on BSE Sensex and 14,175 on Nifty break, and markets trade below them we are likely to see a sharp downside and then the upward rallies would get delayed to that much longer period. Further we would need big positive news to change the sentiment as well. Currently the mood post sharp surge in Covid-19 cases and the negativity about shortage of oxygen, Remdesivir injections and vaccines for Covid-19 are enough negativity for the moment.

Shares of Macrotech Developers Limited listed on the bourses on Monday the 19th of April. With mayhem on the streets, the share was quite resilient and closed with minor losses of Rs 22.85 or 4.70 per cent On Tuesday the share recovered and closed at Rs 503.40, a gain of Rs 17.40 or 3.58 per cent over the issue price of Rs 486.

Markets will be under pressure in the period beginning Thursday 22nd April to Wednesday the 28th of April. The fact that the Dow Jones after hitting a new high of 34,257 points has been struggling and lost ground for the last two days to close at 33,821 points would not help either. In such a situation the best strategy would be to lie low and allow markets to catch up and find new levels of support before entering the markets.

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