Caution Alert To Investors Ahead Of Budget 2025

We are in the final stages of pain and with budget expectations which would start playing out over the next month, expectation of third quarter results keeping the market active, expect a better January 2025 ahead

The December 19-25 period continued to be wild and choppy. Friday (December 20) was yet another day when markets went wild and lost close to 1,200 points on BSE Sensex and almost 400 points on Nifty. Thank God for Wednesday being a holiday on account of Christmas and giving markets a breather from the volatility being witnessed. At the end of the four trading sessions, in which markets lost on three of them and gained on just one, BSE Sensex lost 1,709.33 points or 2.13 per cent, while Nifty lost 471.20 points or 1.95 per cent to close at 23,727.65 points.

Dow after the expected rate cut of 25 basis points nosedived and lost sharply because there would be no more than two rate cuts in the coming calendar year. Dow Jones fell on two of the five trading sessions and gained on three. It was down 152.87 points or 0.35 per cent to close at 43,297.03 points.

The primary market deluge continues on Dalal Street and there seems to be no signs of abatement. We had five issues closing on Monday the 23rd of December and three issues closing on Tuesday (December 24) and yet another issue closing on Thursday (December 26). The final issue of 2024 is opening on Thursday (December 26) and will close on Monday (December 30). The issue is from Indo Farm Equipment Limited and is a manufacturer of tractors and pick and carry cranes.

While hardly any issues have suffered a debacle this calendar year, some of them have struggled. Even in the present lot of issues, Carraro was one such issue, which barely managed to get subscribed at 1.2 times and probably the reason was the high valuation and the fact that the entire issue was an offer for sale. It’s time for introspection by merchant bankers and promoters that it makes good sense to leave something on the table for investors rather than taking everything for one self. One hopes that the new-year makes the concerned people aware and they act accordingly.

Coming to the markets, FPIs were very aggressive sellers in the month of October 24 and have actually been small buyers so far in the month of December. Further if one were to look at the calendar year 2024 so far in totality, they have done nothing much, buying on a net basis a little over Rs3,500 crore.

The December 26-January 1 period ahead begins with December futures expiring on the opening day itself. The present value of Nifty at 23,727.65 points is lower than the series opening by 186.50 points or 0.78 per cent. Looking at the volatility in the current month it’s not much, however, with the complete grip of FPIs on the series, they may not let go and the bears will romp home. The new series beginning on Friday (December 27) may see bulls bouncing back.

Monday (December 23) saw bulls trying to make a comeback and also establish a bottom. While the same is yet to happen, an attempt has been made. In all probability we could see the same happening over the coming two days when trading resumes on Thursday morning. Levels of support would be 23,200-23,400 on Nifty and 76,800-77,400 on BSE Sensex. What would move is the next question. The last leg has seen the benchmark indices bear the brunt of the beating. It would therefore be natural to expect the large caps to be the biggest beneficiary. In terms of resistance levels of around 24,100-24,250 points would be the first hurdle.

We are in the final stages of pain and with budget expectations which would start playing out over the next month, expectation of third quarter results keeping the market active, expect a better January 2025 ahead.

The trading strategy would be to invest in large cap preferably the index stocks as they would move the fastest. Encash gains here and then re-deploy in other stocks. Trade cautiously and remember you have five weeks of time till the budget is presented on February 1 (Saturday), 2025.

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