Market correction has begun, more to follow

MARKETS continued to gain ground during the five trading sessions ended 17th February. However, this period had its share of corrections with Friday and Tuesday being flat. Monday was a day when markets gained sharply and set the tone for the period under review. Today, Wednesday was a day when markets corrected quite sharply and gave the first signs that even they are vulnerable to corrections. BSE Sensex gained 394.44 points or 0.76 per cent to close at 51,703.83 points. NIFTY gained 102.40 points or 0.67 per cent to close at 15,208.90 points.

The key takeaway from the period under review is that the correction that is being talked about has begun, even though it is yet to happen for the weekly period. We still have a long way to go and the volatility in the markets would continue. It is important to note that while the benchmark indices lost more than 3/4th of a percentage point on Wednesday, the BSE Midcap was neutral and BSE Smallcap gained half a percentage point. It is important to note as though the large cap stocks seem to be showing signs of stagnation and tiredness, Midcap and Smallcap continue to be in the limelight.

The positive momentum continues to be supported by continuous inflow of liquidity and buying from FPIs. On the other hand domestic institutions have been net sellers and this is borne by the fact that mutual funds have seen net redemptions on a monthly basis right through the current financial year.

In primary market news, the REIT issue from Brookfield listed on Tuesday had a soft listing, losing about 2 per cent on its debut against its issue price of Rs 275. This poor listing was on account of this trust not having the same credentials in terms of leasable area when compared with Embassy and Mindspace, which are the other two listed trusts in the same space. The leasable area currently available is just about 10.3 million square feet against 28 msf of Mindspace. Further Brookfield would reach this number after investing in new projects and having to raise further capital which would dilute the value of existing unit holders.

The controversial issue from Nureca Limited was subscribed about 40 times against an issue size of Rs 100 cr, an amount of Rs 2,235 cr has been raised. Of this amount, as much as Rs 1,665 cr was raised from retail investors. Retail portion saw as many as 9.38 lac applications, indicating that there is herd mentality amongst these investors and hardly anyone looks at the document or risk factors.

The issue from RailTel Corporation which is currently open and would close on Thursday the 18th of February, has been subscribed 6.65 times. This issue has seen 14.78 lac applications from retail investors so far. Markets would continue to remain choppy in the period ending 24th February. Some more correction is certainly on the cards. This would be sharp and swift. Post this correction there is a strong possibility of one more attempt being made to make a new high in the markets before the current bull run takes a significant break. Continue to book profits and use rallies to take money off the table.

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