Bulls regain control over Dalal Street

The March 24-30 period under review period behaved on expected lines with markets down on the first two days and making a U-turn on Monday, and gaining for the remaining three days. The rally on Wednesday was the strongest. BSE Sensex gained 999.51 points or 1.70 per cent to close at 58,683.93 points while Nifty gained 252.60 points or 1.44 per cent to close at 17,498.25 points.

The Dow Jones lost on the first trading session and has gained on the last four sessions consecutively. It was up 486.33 points or 1.39 per cent to close at 35,294.19 points.

What has led to this rally? NAV exercise seems certainly on and we are seeing individual stocks being pulled up. Secondly there is a feeling that the war in Ukraine seems to be petering off. This feeling maybe more of something floated by the western world, is not a reality. The only thing that has happened is that the discussions between the two countries have increased and they seem to be progressing. In short, there is no negative on that front whatsoever.

Commodity prices are rising faster than one can imagine and so have the markets. The bottom on March 8 was at 52,260 and in just about three weeks we have gained 6,500 points on BSE Sensex. Similar rise on Nifty has been from 15,671 to 17,498 points, a rise of 1,827 points. The true test of this rise being sustainable would be when the results for the March quarter are declared beginning in just less than two weeks from now.

The period March 31-April 5 would begin with March futures expiring on March 31. Expect NAV propping to also happen as interested people play with the closing prices to suit their performance. The current March series is up 1,250.3 points or 7.14 per cent with one day to go. Bulls have the grip and there is no way that they would allow bears to even claw their way back.

In the primary market, issues were struggling in the last quarter of March with just three issues having tapped the markets. Suddenly we see a flurry of issues which including the follow-on offer from Ruchi Soya Industries Limited has more than doubled with five issues. State PSU ONGC has also tapped the markets with its offer for sale. The three issues are Uma Exports Limited, Veranda Learning Solutions Limited and Hariom Pipe Industries. All three issues are small in size. The issue from Ruchi Soya Industries was subscribed 3.80 times but ran into a controversy with unsolicited circulation of SMSs about the issue being an attractive offer considering the huge discount between the traded price and the IPO price. While in reality this is a fact, SEBI asked the company to allow an exit option for two days to all subscribers other than Anchor investors. The time ended on Wednesday at 5pm. The FPO shares are now expected to list on Friday i.e. April 8th.

Coming to the markets in the period ahead, expect them to remain choppy and volatile. Assuming that the rally has been primarily on account of NAV and year end considerations, there could be some downward pressure in the period ahead. If, however, there is concrete positive development on the war front, the gains could continue to be held.

A strategy for investors would be to sell into the rally and use corrections to buy only large cap stocks. Post expiry day, markets would be tougher to predict.

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