Focus on mid, small cap stocks

The period May 18-24 under review saw the domestic markets make yet another attempt to cross key resistance areas, but failed. The markets gained on two of the five trading sessions, lost on two and remained flat on the fifth session. Results from all the large companies have come and only those from the Small-cap and mid-cap remain who still have about a week to go before time runs out for declaring results for the fourth quarter and year ended March 23. BSE Sensex gained 213.14 points or 0.35 per cent to close at 61,773.78 points, while Nifty gained 103.65 points or 0.57 per cent to close at 18,285.40 points.

Dow Jones gained on two of the five sessions and lost on three sessions. The losses were continuously over the last three days. The US house continues to debate on the debt ceiling without resolution and this uncertainty is taking its toll on the markets. Dow Jones lost 329.02 points or 1.87 per cent to close at 33,055.51 points.

The hardly in circulation Rs2,000 note has been withdrawn by RBI, but would continue to remain legal tender. The common man has been given time till September 30 to exchange these notes from banks till then. Immediately rumour mills have begun talking about the impending issue of Rs1,000 note to offset the loss of a high denomination note. The first day of exchange was Tuesday (May 23), but there were no queues witnessed anywhere. Probably the time limit given till end September has ensured that the rush is not there.

The primary and fresh issue of units from Nexus Select Trust, which is consumption based real estate offering listed on the bourses on Friday. Units which were issued at Rs100, debuted on the bourses at a discovered price of Rs102.27 on BSE and Rs103 on the NSE. They closed day one at Rs104.26 on BSE and Rs104.29 on NSE. Gains made were 4.26 per cent on BSE and 4.29 per cent on NSE. On Wednesday, they closed at Rs104.00 on BSE and Rs104.01 on NSE. The unit seems to have discovered its fair price and would trade at similar levels, moving up only to factor the pay-out that would be declared when results for the September quarter are declared.

The largest public-sector bank SBI, reported excellent numbers for the quarter ended March 23 and also its annual results for the year ended March 23. The company reported a net profit of Rs18,093 crore for the quarter ended March 23 against Rs15,477 crore in the previous year. For the year ended March 23 the net profit was Rs55,648 crore against Rs35,373 crore in the previous year. The bank has declared a dividend of Rs11.30 for the year. This is the first bank and only the second company in India to declare an annual profit of over Rs50,000 crore.

Along with SBI results, the entire public-sector banks have declared profits which have crossed Rs1.05 lakh crore for the year ended March 23. This is the best ever performance by the PSU banks and it is after the capital infusion which was done by the government about 5-7 years ago. The pack is now on stable ground and their NPAs are also under check.

The advent of ONDC has seen competition hotting up between food delivery companies. While Zomato says they will become profitable going forward, one wonders whether that can happen without them becoming fair to their partners, the food chains and restaurants. Currently Zomato charges a premium on the menu of the restaurant partner which is being contested by them and is considered as unethical. It would be fair to say that the majority of new age companies, which came during Covid-19, have not delivered. They were able to get away with their high and at times obscene valuations only because of the environment.

The May 25-31 period ahead begins with May futures expiring on Thursday (May 25). Currently the bulls have an upper hand with a series lead of about 370.35 points or 2.06 per cent. It is almost impossible to imagine that this lead could be surrendered in just one day. Markets have a desire to go up and they are making serious efforts to do so, but they seem to be running into resistances. Secondly, even though FPIs have been buyers, they are just not able to cross the resistances. They seem to be pulled down like a magnetic force exists.

Key resistances are at levels of 18,460-18,480 levels on Nifty and corresponding to 62,600-62,700 on BSE Sensex. On the support side, levels of 18,000-18,050 on Nifty and 61,150-61,300 on BSE Sensex would act as solid supports. If these are violated, then the next level would be at 17,850-17,900 or 60,700-60,850 levels. The pivot for the markets is around 18,300 and 61,900 levels where market moves to be centred currently. The strategy would be to buy on dips and sell on rallies and concentrate on mid-cap and small-cap space. There would be intraday volatility and markets would respect areas of support and resistance.

Focus points

• Results from small-cap and mid-cap cos from next week

• May F&O series expiring today

• Mkts seem to be running into resistances

• FPIs net buyers, but not able to cross resistances

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