Expect Markets To Remain Volatile

Markets continued their volatile and choppy run in the period 28th November to 4th December. The period began with November NIFTY futures expiry which happened on the very first day of the period on 28th November. Markets were weak on that day and lost ground. The series lost 291.20 points or 1.20 per cent to close at 23,914.15 points. Over the last couple of weeks, the bulls have clawed back and reclaimed lost ground. It may be mentioned that a day before expiry, the series was positive and in favor of the bulls.

The period saw markets gain on three of the five trading sessions and lose on one. The last day of the period saw markets unable to make up their minds where they would end. After oscillating between positive and negative through the day, they finally closed with small gains. BSE-SENSEX gained 722.25 points or 0.90 per cent to close at 80,956.33 points while NIFTY gained 192.55 points or 0.79 per cent to close at 24,467.45 points.

Dow Jones lost on three of the four trading sessions and gained on one. Dow lost 154.78 points or 0.65 per cent to close at 44,705.53 points.

In primary market news, the issue from Suraksha Diagnostics Limited closed for subscription on Tuesday the 3rd of December. The issue received a muted response and was subscribed 1.27 times overall. The QIB portion was subscribed 1.74 times, HNI portion subscribed 1.41 times and Retail portion subscribed 0.95 times. There were 1.49 lakh applications in all. The street found the issue very expensive with a historical PE ratio of just about 100 times. It would be interesting to see how the share behaves when it lists on Friday the 6th of December.

RBI will meet on 5th December to review interest rates. It is widely believed that they would be kept unchanged with a provision to introduce a change at short notice if so be required.

Markets have over the last 7-10 trading sessions ensured that they have been able to counter the levels of 23,450-500 points on NIFTY. They closed at 24,467 points and the technical are well set up. Markets have everything going for them to now make a dash to the next resistance level of 24,850-900 points and then further upwards towards 25,400 points. It’s better to take one step at a time and the first resistance zone has opened up without doubt. FPIs have begun small purchases after a lull of almost two months. With Dow Jones too looking tired, it appears that FPIs would look at India again even if it is only the large cap segment. We must also keep one more point in mind. The number of OFS that is taking place where the sellers are the promoters and also PE investors is increasing. Every week there are a handful of such issues and the number of QIPs seems to be mounting. On Tuesday we saw the OFS in Indegene and Medi-Assist while earlier in the week we saw a QIP from Godrej Properties. These issues are sucking out the liquidity from the markets as ultimately the investors are the domestic funds and, in some cases, FPIs.

Coming to the markets in the period 5th December to 11th December, expect markets to remain volatile. With markets holding on to support in the previous period, we have moved up one notch in the resistance table and will need to surmount the same to move forward. On the support side there is very strong support at the lows made on 21st of November of 23,263 on NIFTY and at 76,802 points on BSE-SENSEX. These levels appear rock solid as of now and would need a super herculean effort to break in the coming week. With resistance targets moving up we can move one more level of support higher as well. This would be around 23,800 points on NIFTY and at 78,950 levels on BSE-SENSEX.

The trading strategy would be to shift to safety and that lies in the large cap stocks. Even if FPIs were to return they would look for comfort in buying large cap stocks and that should be the focus area. We are not yet out of the woods and need to move higher to be reasonably sure. The next ten sessions should give the necessary clarity. Till then trade cautiously.

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

an advisory firm)