Markets reeling under pressure

Markets in the January 11-17 period under review were super volatile and caused many a heart to beat at levels, which are not natural and may lead to even a heart attack. While Friday and Monday saw markets rise sharply, Wednesday saw them correct equally sharply and gains of almost both the days (Friday and Monday) were wiped out. At the end of the period, with markets gaining on two of the five sessions and losing on three, BSE Sensex was down 156.95 points or 0.22 per cent to close at 71,500.76 points, while Nifty lost 46.75 points or 0.22 per cent to close at 21,571.95 points. The highs that were made on BSE Sensex were 73,427.59 points and 22,124.15 points on Nifty. The fall from there has been quite steep and markets are down close to three per cent from the highs. More interestingly this is in a little over a day as the highs were made on Tuesday morning.

Dow Jones lost on two of the four trading sessions and gained on two. It was down 154.04 points or 0.44 per cent to close at 37,361.12 points. While a rate cut is expected faster than one can think of, not quite sure when the same would happen. Markets are banking on a rate cut happening quite soon and if it fails to materialise, there could be disappointment in the US markets.

In primary market news, shares of Jyoti CNC Ltd listed on Tuesday and had a great opening. Shares, which were issued at Rs331, ended day one at Rs33.15, a gain of Rs102.15 or 30.86 per cent. There was huge volume in the shares of the company and the traded volume exceeded the issue size of about 3 crore shares. On Wednesday, the share lost some ground and closed at Rs 427.55, a net gain since listing of Rs96.55 or 29.16 per cent.

The public issue from Medi-Assist Healthcare Services Ltd, which was open for subscription from Monday (January 15) to Wednesday (January 17), received excellent subscription and response. The issue was subscribed 16.24 times overall with QIB portion subscribed 40.14 times, HNI portion subscribed 14.85 times and Retail portion subscribed 3.19 times. There were over 7.44 lakh applications in all.

The big trigger for today’s loss was the declaration of HDFC Bank results for the third quarter. While the results were largely in line, what the street did not like was the slowdown witnessed in deposit growth. The share was mercilessly hammered and lost Rs142.05 or 8.46 per cent to close at Rs1,536.90. The contribution to the BSE Sensex fall was 944 points out of a total fall of 1,628 points or almost 58 per cent. With HDFC Bank leading the fall, it became a reason for many stocks which have been continuously rising to take a breather and actually correct today.

Coming to the January 18-24 period, the markets would trade under pressure after the severe drubbing they received on Wednesday. While there could be a corrective rally, market players would use the occasion to book profits and lighten their commitments ahead of January futures which would expire on Thursday (January 25). Readers would recall that Friday (January 26) is a trading holiday on account of Republic Day. The markets would look to correct and would therefore trade with a negative bias. While the extent of fall and the length of correction at this point is not certain, it could come in either of two different ways. The first could be a sharp sell-off over the next couple of days or a prolonged slow correction over the next week with a couple of up days thrown in as well. Either way the trend would be down.

The strategy would be to use sharp dips to add stock, but only from the large caps, while any sharp rallies should be used to sell. After a great rally, the inevitable correction has to follow. The sooner the better and healthier for the markets. Trade cautiously.