Broad-Based Trading Likely As Volatility Continues In Mkts

The March 6-12 period under review was extremely volatile and choppy. The immediate short-term bottom for the time being was very clearly made on the March 4 and the markets attempted to build on that. They did succeed for the initial couple of days and then once again markets were badly hit. This time by falling US markets and not the selling FPIs. At the end of it all, markets saw BSE Sensex gaining on one of the five trading sessions and losing on four, where two days were sideways. Nifty on the other hand gained on three of the five trading sessions and lost ontwo, with two of the days witnessing very small gains. BSE Sensex gained 299.53 points or 0.41 per cent to close at 74,029.79 points, while Nifty gained 133.20 points or 0.60 per cent to close at 22,470.50 points.

Dow Jones lost on three of the five sessions and had a bad week. Dow Jones lost 1,087.51 points or 2.56 per cent to close at 41,433.48 points. The Americans seem to be unsure how the economy would react with the imposition of tariffs as envisaged and propagated by Donald Trump. The Dollar index has weakened from about 109-110 to about 103, signifying that global currencies are becoming stronger and the dollar weakening. This led to a sharp rise in metal stocks. Secondly, people are more confused about tariff wars taking place in the US and there appears to be no clarity on what will happen. Auto makers set up factories to make components in Mexico so that they could benefit from cheaper wages in Mexico. If they have to pay the tariffs now, the entire advantage of creating that eco-system would be lost. Sweeping statements at the time of elections were fine, but reality is certainly tougher. With such anomalies creeping in, people want answers and they want them fast.

FPI selling though continuing, the intensity seems to be weakening. Good thing, with further clarity on the fact that China is no longer as cheap as earlier. With prices having softened in India,valuations for a select category of stocks is looking attractive all over again.

The March 13-19 period ahead has a holiday on account of Holi (Friday), the festival of colours. Going forward we will continue to have volatility in our markets. Expect markets to trade in a broad band with immediate resistances being in the broad zone of 22,800-22,900 on Nifty and at 75,000-75,300 points on BSE Sensex. On the support side while the lows made on Tuesday (March 4) would be solid support, the band around these levels in plus or minus 50 points would be a better way to look at things. Prior support would be higher at 22,250-22,300 points on Nifty and at 73,400-73,650 on BSE Sensex. The lows made on the BSE Sensex and Nifty on Tuesday were at 72,633.54 points and 21,964.10 points respectively, while the highs made on Friday were at74,586.43 points and 22,633.80 points.

Markets after the sharp sell-off in the beginning of March are yet to stabilize. What we are seeing isthe after effects of the same. To add to the concern is the fact that US markets are now facing thefury of global markets. What Trump set out to do and is now doing, is not going well with the verypeople who elected him with a massive mandate. Guess they will have to live with it for four years. Primary markets seem to have taken a temporary hiatus with promoters and bankers unwilling totest markets in the present shape. One would have to wait till April for any clarity on IPOs looking totap the markets.

The strategy for the period ahead would be to allow markets to stabilize to new levels, which they had not previously seen. They need to get accustomed to these levels, build a base and then moveup in a gradual manner. No sharp knee jerk movements on the upside are expected. Trade cautiously and allow markets to find their own levels.

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

an advisory firm)