Markets To Remain Volatile With Initial Bout Of Weakness

The markets have risen sharply and investors have made money. FPIs have adopted a strategy of selling India and buy China. While domestic institutions were matching FPI sales aggressively, they have now realized the stance of FPIs and have therefore changed their strategy. While they continue to be net buyers, they are not buying what FPIs are selling

The domestic stock market in the September 26-October 2 period was volatile and eventful. It began with September futures, which expired on the opening day of the period itself. The markets had a strong showing and one saw bears scurrying to cut their positions. Friday, which was the opening day of the new October series, began on a weak note and one saw markets lose ground. What happened on Monday (September 30) caught people off guard, and one saw markets lose substantial ground. Tuesday, the last day of the period, saw markets unable to make up their mind as to what they wanted to do, and finally closed flat with next to nothing losses. At the end of the period, they lost on three of the four sessions and gained on just one. BSE Sensex lost 906.58 points or 1.06 per cent to close at 84,266.29 points, while Nifty lost 207.25 points or 0.80 per cent to close at 25,796.90 points.

September futures expired at 26,216.05 a gain of 1,064.10 points or 4.23 per cent. It was complete domination by the bulls and they were helped by the US Fed rate cut of 50 basis points and also the FTSE index rebalancing which took place in the same week.

Dow Jones was in no man’s land and virtually closed flat. For the records, it gained on three of the five trading sessions and lost on two. The net change was a loss of 51.25 points or 0.12 per cent to close at 42,156.97 points.

Sebi in its board meeting on September 30 has come down very heavily on the futures and options segment of trading. It has raised the size of contracts from Rs5 lakh plus currently to Rs15 lakh plus. It has also introduced provisions where premiums are to be paid upfront and not end of day. Thirdly the system of there being different expiry on different days of the week would come to an end with now just one expiry per week allowed for each exchange.

In economic news, GST gross collection for September has grown to Rs1.70 lakh crore, a growth of 6.5 per cent, the slowest in the first half of FY25. The figure on a net basis reduces after refunds to Rs1.5 lakh crore.

FPIs had turned buyers in the markets in recent times. They have again turned sellers as the Chinese markets are offering huge money-making opportunities in the immediate short term. China has announced a slew of measures to arrest the decline in the markets and economy and they have yielded measures. The markets have risen sharply and investors have made money. FPIs have adopted a strategy of selling India and buy China. While domestic institutions were matching FPI sales aggressively, they have now realized the stance of FPIs and have therefore changed their strategy. While they continue to be net buyers, they are not buying what FPIs are selling. Coming to the markets, the October 3-9 period ahead, we expect markets to remain volatile with an initial bout of weakness. RBI meets for its MPC meeting during October 7-9 to review interest rates. It is widely believed that they would hold interest rates currently and consider a cut if any, in the January meeting. In case something to the contrary does come, expect rate sensitive sectors like real estate and automobiles to rally.

The strategy would be to allow market weakness to play out and then enter into large-caps, which are fundamentally solid stocks in which an individual is comfortable. One must also remember that by the time the period plays out, the result date for the oncoming result season would have begun with the IT stocks taking the lead. The June quarter results were not up to the mark and were well below expectation to say the least. Valuation concerns, which are there in the market could get exacerbated if this quarter number also disappoints. Trade cautiously.

(The author is the founder of Kejriwal Research and Investment Services,

an advisory firm)