Markets To Remain Volatile, Choppy

It was a very short period November 14-20 under review with just three trading sessions, in the period under review. We had a holiday on Friday and then the period ended one day earlier with elections being held in Maharashtra and with both exchanges located in Mumbai, it became a trading holiday. Markets fell on two of the three trading sessions and gained on one which saw huge drama. Markets went up very sharply and then fell equally sharply and retained a mere fifth of the intraday gains. At the end of it all, markets lost 112.57 points or 0.14 per cent on BSE Sensex to close at 77,878.38 points, while Nifty lost 40.55 points or 0.17 per cent to close at 27,518.50 points.

Dow Jones lost on four of the five trading sessions and lost 642.64 points or 1.46 per cent to close at 43,268.94 points. The President would assume office on January 21 and till then there would be a lot of speculation on what Trump would do once he is in office. Currently it is all speculation and hearsay. With two months to go, it’s a long time and a lot can happen in the markets till then.

There was just one listing during the period under review with shares of Niva Bupa Health Insurance Company Ltd listing on Thursday (November 14). The issued price was Rs74. The discovered price was Rs78.50, while the closing price was Rs74, flat on listing day. Over the remaining part of the period, shares lost a tad and closed at Rs73.95, a loss of Rs0.05 or 0.06 per cent.

Markets have a trading holiday on Wednesday as Mumbai and Maharashtra vote on Wednesday the November 20. This would break the momentum and could see positions being reduced on Thursday. The good part is that exit polls for Jharkhand and Maharashtra would be announced on the evening (November 20) post the polls. If the BJP led NDA were to do well in these elections, this could be the short-term trigger that the markets are looking for. Otherwise, poor results, FPI selling, Dow having run ahead of realty and now likely to correct till the administration starts delivering, are enough reasons to keep the markets under pressure.

Exit polls would be available by the time you read this article and markets would react accordingly on Thursday and Friday. Saturday would see the actual results being declared and react when they begin trading on Monday. Volatility would be the order of the day and one should expect choppy markets ahead. While Tuesday one saw markets gain sharply and then correct even more sharply. Further FPI selling which was on a reducing trend over the last few days, picked up steam on Tuesday.

Some of the foreign brokerages are becoming bullish on India all over again and believe that there is money in India investing over the medium term. When buying will actually emerge is a million dollar question which everybody seems to be watching carefully.

Coming to the November 21-27 period ahead, expect markets to remain volatile and choppy. While we could be in the process of forming a bottom currently, one cannot say that the same is a certainty. The election results could be a positive trigger. If that too fails, the first major support would be in the band of 23,100-23,200 points and the second would be in the region of 22,500-22,600 points. These would correspond to 76,400-76,600 as the first level and 74,600-74,900 on BSE Sensex. On the resistance side, first levels are at 23,800-850 and then at 24,100-24,200 points on Nifty. These would correspond to 78,400-78,500 and 79,300-79,550 on BSE Sensex. It seems reasonably certain that in the short term, these supports would hold and markets bounce back for at least once.

The simple strategy for the period ahead would be to bet on the markets post results declaration on Saturday and expect markets to respond to election outcome. Exit polls outcome could be risky as they have shown their inconsistency in recent outings. Spate of poor results, current geo-political situation and FPI selling are reasons for worry.

The poor run of recent IPOs does not help matters either and it’s the time that promoters and merchant bankers tighten their belts and leave something on the table for investors. Trade cautiously.

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