Markets may resume upward rally

The period (March 31-April 6) under review was volatile and eventful. It began with March futures which expired on March 31. The next day was the first trading day of the new series and it began with a bang and saw markets gaining sharply. Monday saw a surprise and unexpected announcement of merger from the HDFC twins, which saw markets rocketing. Tuesday and Wednesday were days when markets saw profit taking and correction. All in all, markets gained on two of the five trading days. BSE Sensex gained 926.48 points or 1.55 per cent to close at 59,610.41 points, while NSE Nifty gained 309.40 points or 1.74 per cent to close at 17,807.65 points.

Dow Jones gained on two of the five sessions, losing on the remaining three. It was down 652 points or 1.84 per cent to close at 34,641 points.

March futures expired at 17,464.75 points, a series gain of 1,216.80 points or 7.49 per cent. The gains on Monday saw BSE Sensex rise 1,335 points. Of this rise, HDFC bank gained Rs 150.15 or 582.10 points while HDFC gained Rs 227.95 or 365.56 points. Effectively the twins combined gained 947.66 points or almost 71 per cent of the rise in the BSE Sensex. This rally could be termed as a gift to the markets. Tuesday and Wednesday, saw markets giving up a large portion of the gains made on Monday. They lost 1001 points on the BSE Sensex and 246 points on Nifty. Naturally, the twins have surrendered a large part of the gains.

The financial year 2021-22 saw the BSE Sensex move from 49,509.15 points to 58,568.51 points, a gain of 9,059.36 points or 18.30 per cent. Nifty moved from 14,690.70 points to 17,464.75 points, a gain of 2,774.05 points or 18.88 per cent. Despite the turmoil and the Russia Ukraine war, it has been much more than an average year for stock market returns. It is even more significant from the fact that this is the second consecutive year of super returns for the market.

The good thing has been that FIIs have stopped selling and over the last week or so have turned buyers. Incidentally our neighbours in the Indian sub-continent seem to be at the receiving end. Pakistan and Sri Lanka are both in a big political and economic mess of their own making.

The follow-on public (FPO) offer from Ruchi Soya Industries Limited was subscribed 3.80 times. Sebi then directed the company to allow investors two days to withdraw their bids because some messages were circulated to induce investments. During the withdrawal, bids for 97.40 lakh shares were withdrawn against total bids received of 17.60 lakh shares. The follow-on offer oversubscription was reduced from 3.80 times to 3.60 times. The closing price of Ruchi Soya at the NSE on Wednesday was Rs 755.25, a premium of Rs 105.25 or 16.19 per cent to the discovered or allotted price of Rs 650. Shares from the FPO are to list on Friday the 8th of April. I believe the listing price/discovered price should be around Rs 710 plus or minus Rs10 on listing day. Wednesday, Ruchi Soya saw huge traded volumes of about 131.81 lakh shares. Delivery volume was 38.10 lakh shares which was 28.91 per cent of traded volume. Some people who have been allotted shares in the FPO have sold shares as delivery of today's trade would happen on Friday only. Traded volume and delivery were both at record highs.

The Russia-Ukraine war seems to have become a never ending one and we seem to be getting nowhere. The world carries on and there are the usual noises coming from the concerned parties. In the meanwhile, the world's largest miner of Gold, Russia, has announced a new fixed price for its currency with gold. The price per gram of gold has been specified as 5,000 Roubles. This has virtually reduced the value of gold by around 30 per cent. This announcement offers countries wanting to buy crude oil and gas from Russia, an alternate currency to Euros, Dollars and Roubles. How things pan out in the near future would be interesting developments.

Result season would begin from the next week for the 4th quarter January to March and annual results for FY2022. While sales have seen an increase there is substantial cost pressure in all companies which is witnessed. This would lead to a rise in top line but the bottom line could be under pressure. Results from individual companies would decide how the share prices of these company's fare going forward.

Coming to the period 7th April to 13th April, we should expect markets to resume their upward rally. The market momentum favours the bulls and there is no reason why markets would not gain in the period ahead. The end of the period would be under pressure assuming markets are rising, as there is an extended holiday with trading holidays on Thursday and Friday. This could result in a muted Wednesday. The strategy should be to ride the rally and make purchases in large cap and select midcap and Smallcap stocks as well. The breadth of the market would continue to improve as markets rally. Important point to be remembered is that profit booking should be kept in mind at all times as volatility is now a part and parcel of market movement. The Ukraine-Russia war would be at the back of the mind with no immediate result visible.

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