Lockdown fear shakes market

Markets may react negatively to the Maha govt announcement when they reopen for trading on Thursday

THE period April 8 to April 13 saw markets under pressure and crack. Markets gained sharply on Thursday and were positive with an upward bias on Friday. They had a major fall on Monday when the expectation of a lockdown in the financial capital Mumbai was likely to happen.

They recovered from the lows of Monday and seemed to be holding themselves but certainly not out of the woods. BSE Sensex lost 1,117.70 points or 2.30 per cent to close at 48,544.06 points while Nifty lost 314.25 points or 2.17 per cent to close at 14,504.80 points.

The state government of Maharashtra has announced a lockdown from 8pm on April 14 till May 1. While there would be night curfew, section 144 has been imposed during the day. The idea of the same is to 'Break the chain' as the state has witnessed a massive upsurge in covid cases over the last few weeks. Markets will react negatively to the announcement when they reopen for trade on Thursday morning.

Readers would recall the trading levels that I had mentioned during the previous week of 48,250-50,500 on BSE Sensex and 14,250-14,900 on Nifty. Interestingly the high of the day was 50,118 on BSE Sensex and 14,984.15 on Nifty. These levels were achieved in the beginning of the period.

On Monday when the markets corrected, the lows were 47,693.44 points on BSE Sensex and 14,248.70 points on Nifty. We have seen the levels mentioned earlier being respected on both the upside and the downside in a span of just two days.

Dow Jones is also struggling and has failed to move up further. The high of 33,811 points is acting as resistance and needs to be taken out for any sustained rally there as well. Currently markets have become range bound in the US.

TCS has announced impressive results and the fourth quarter results in particular were noteworthy in terms of growth achieved. Revenue from operations in the fourth quarter were at Rs 43,705 crore against Rs 39,946 crore in the previous year.

For the full year, revenues grew from Rs 1,56,949 crore to Rs 1,64,177 crore. The deprecating rupee would be an added advantage.

The results from IT, healthcare, automobiles particularly four wheelers, auto ancillaries, metal producers would enthuse the market and find favour from investors. FMCG is expected to post decent results but with the new Covid-19 outbreak could see an impact going forward.

The mega issue from Macrotech Developers Limited to raise Rs 2,500 crore from a fresh issue was oversubscribed 1.37 times. The price band was Rs 483-486. The QIB portion was subscribed 3.06 times, HNI portion was subscribed 1.45 times, Retail portion was subscribed 0.40 times while the Employee quota was subscribed 0.17 times.

Coming to the markets, the period from April 15 to April 21 would see four trading days with Wednesday the April 21 being a trading holiday. A fair amount of clarity would be available about performance of the top companies from the benchmark indices by then.

FPI's are currently in a mixed state of mind where there are days of buying interspersed with days of selling. What is however clear that is the quantum of net purchase or sale has reduced. One could say that there is a wait and watch attitude currently.

With the lower levels of 48,250 on BSE Sensex and 14,250 on Nifty being breached on Monday, there is a possibility that there could be a knee jerk reaction on Thursday when markets reopen.

If the previous lows of 47,693 and 14,248 are violated and recovery does not happen on the same day, we are in for further downside. In case they are not breached there remains a reasonable possibility of markets gaining and making an effort to reach the higher levels of the range again. It makes sense to lighten positions and continue to sell on sharp rallies. For buying one must wait for markets to find lower levels or confirm support. Trade cautiously.

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