Consolidation more likely in uncharted territory

In the May 25-31 period under review, the domestic markets had been on a roll and are now within a whisker of touching all time highs on both the BSE Sensex and NSE Nifty. The period under review began with May futures expiry happening on a positive note. Markets gained on expiry date and the series closed at 18,321.15 points, gaining 406.10 points or 2.27 per cent. It was a series where the bulls were in control almost throughout the series. Markets made huge gains on Friday and the momentum continued, but with the quantum of daily gains reducing. On Wednesday, which was the last day for the period under review, markets corrected sharply and surrendered about a third of the gains made so far. At the end of the period, BSE Sensex gained 848.46 points or 1.37 per cent to close at 62,622.24 points, while Nifty gained 249.00 points or 1.36 per cent to close at 18,534.40 points. Markets gained on four of the five trading sessions of the week. Interestingly Wednesday saw a gap down opening.

Dow Jones had a flattish week losing on three of the four trading sessions and gaining on only one day. Sharp gains were registered on Friday when markets closed for the long weekend with Monday being a holiday. At the end of the period, Dow remained flattish losing 12.27 points or 0.04 per cent to close at 33,042.78 points.

With results season almost over and Wednesday being the last day for declaring results, it will be time to analyse results and look for trends and expectations from the April-June quarter. In the next week or so, a summary of overall performance would be available to identify positive trends and decide where action could follow.

The all-time highs were made on the December 1, 2022, on a closing basis and an intra-day basis. These levels were 63,583.07 and 63,284.19 points on BSE Sensex and 18,887.60 points and 18,812.50 points on Nifty, respectively. This appears the best chance for markets to make a new high. It is ‘Now or Never’ opportunity and if the same is not done in this present up move, it would mean another long period of consolidation before the next move could begin. At the end of the day, the difference remains at a mere 662 points on BSE Sensex and 278 points on Nifty. Whether we will see a new high or not only the next few days will tell.

The strategy for the period ahead June 1-7 would be to play with the market swings and mood. We would be in uncharted territory, if there is any upward movement from here. Normally any violation at such levels gives a swing of about three per cent at such a juncture. That would be the target to play for and one needs to keep euphoria and huge volumes as signs of topping out. In case we fail to cross the levels, we could see a volatile move and markets going into yet another phase of consolidation. Experts in the US believe that the debt ceiling issue would be resolved before the week is over. They however caution that the resolution by raising the ceiling would be negative for markets.

Markets have resistance at the highs or closing level made on Tuesday at 62,9820-63,000 on BSE Sensex and at 18,625-18,650 on Nifty. The support for the market exists at 18,300-18350 levels on Nifty and at 62,025-62,175 levels on BSE Sensex. If these are violated, the next levels would be at 18,000-18,050 or 61,150-61,300 levels. One should expect markets at these levels to be super volatile with bulls and bears fighting ferociously to create history.

If the correction lasts for more than a day or two, the wait for a new high could become much longer and therefore painful. Further, such delay could bring about questions about it being achieved this time around. Cross your fingers to see action being played out like the IPL finals played in Ahmedabad on Monday.

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