Markets remain volatile and uncertain

The domestic markets in the January 18-24 period were volatile to say the least. We had trading on Saturday and it was effectively compensated by a holiday on Monday. The event on Monday was the consecration of Lord Rama at Ayodhya. During the five-day trading period, markets lost on three of the five sessions and gained on two. At the end of what was a super volatile period, BSE Sensex lost 464.69 points or 0.65 per cent to close at 71,060.31 points, while Nifty lost 121.05 points or 0.56 per cent to close at 21,453.95 points. The volatility witnessed in Midcap and Smallcap space was even higher and some of the stocks, which have been flying in this space actually crashed. Suffice to say that it was a good reality check for many companies.

Dow Jones gained on three of the five trading sessions and lost on two. It gained 544.33 points or 1.46 per cent to close at 37,905.45 points.

In primary market news, the issue from Medi Assist Healthcare Services listed on Tuesday the 23rd of January. The company had issued shares at Rs418 and shares closed on day one at Rs 464.25, a gain of Rs46.25 or 11.06 per cent. Today the share lost some ground and closed at Rs455, a gain of Rs37 or 8.85 per cent.

The issue from Epack Durable Ltd closed for subscription today. The issue was in a price band of Rs218-230. The issue which consisted of a fresh issue of Rs400 crore and an offer for sale of 1.04 crore shares was subscribed 16.74 times overall with QIB portion subscribed 25.59 times, HNI portion subscribed 29.03 times and Retail portion subscribed 6.42 times. There were 8.44 lakh applications.

Markets are in a tizzy and are trying to find their own levels. We saw the massive fall on Wednesday (January 17) post the HDFC Bank Results. One also saw the sharp rally led by IT stocks post the bunching of results on Friday (January 12). One is therefore getting a feeling that there are a group of large players who create the setting for moving markets in either direction on a set of news, which may not necessarily be the right direction or response, to suit their advantage. This causes a chain reaction in the markets and a movement which is really sharp.

Banking shares have been under pressure and one saw this in the case of HDFC Bank, Axis Bank and even ICICI Bank, which reported good results. Maybe the expectation of people changes with the level of the benchmark indices.

Coming to the markets in the January 25-31 period, we would see markets remaining volatile and uncertain. The period begins with January futures expiring on the very first day, Thursday (January 25). This would be followed by a holiday on Friday on account of Republic Day. The period ahead would end on budget eve, which would be announced on Thursday (February 1). This would ensure that people lighten their positions on Thursday when the January F&O series ends as Friday is only an India centric holiday and the extended weekend becomes three days. Similarly, when the period ends on Wednesday, people would like to have a smaller position as there could be surprises in the budget the following day.

The strategy would be to keep positions light in the period ahead as results season is ongoing. This causes higher volatility than one normally expects. A slightly better or slightly poorer result leads to sharp volatility accompanied by huge volumes making the rise or fall that much more accentuated. Secondly, one result from the sector leader leads to similar performance from the rest of the team or other companies from the same sector.

The current weakness in the markets will get over once we break 21,000 points on Nifty and establish a short to medium-term bottom. How long that would take is anybody’s guess, but it also needs news flow. Whether the budget can provide the impetus is to be seen over the next week or so. The simple way to trade the period under review would be to sell on sharp rallies and buy on big dips. Opportunity is presenting itself continuously. The need of the hour is to grab the opportunity and not let it pass. Trade cautiously.

Truncated Week

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

l Traders may lighten their positions on Thursday

l January F&O series ends on Jan 25

l No trading on Friday

l Only 3 sessions this week