Mkts likely to see Broad-range trading

Markets in the June 23-29 period under review behaved on expected lines with gains on the first three days. Tuesday saw markets open weak but recover all the losses and close sideways with negligible gains.

Wednesday markets tried to replicate the previous day with a weak opening and markets at one point trading in the positive, but failed to close in the positive and ended with losses. For the period, BSE Sensex gained 1,207.44 points or 2.28 per cent to close at 53,026.97 points while Nifty gained 385.80 points or 2.44 per cent to close at 15,799.10 points.

Dow Jones has had a volatile week, gaining on the first three days and losing on the remaining two. It was up over 450 points on Tuesday, but closed with losses of 491.27 points. For the week Dow Jones was up 415.22 points or 1.35 per cent.

Zomato has decided to acquire Blinkit, formerly known as Grofers in an all-share deal. Zomato would pay Rs 4,447 crores in shares for the same. Readers would recall that Zomato had tapped the capital markets with its IPO at Rs 76 for a fresh issue of Rs 9,000 crore and an offer for sale of Rs 375 crores and listed on 23rd of July 2021. Shares closed day one at Rs 125.85.

The share hit a 52-week high and low of Rs 169.10 and 50.35 respectively. The share trades at Rs 70.35 (on day of deal announcement) and is below the issue price like most new age technology platform companies. Probably the honeymoon that markets had with them is behind us. Both the companies, Blinkit and Zomato are currently loss making.

Zomato on consolidated net total revenue of Rs 4,192 crores, lost Rs 1,222 crores for the year ended March 2022. What is interesting is the fact that the deal was done at a discount to the fund raise from Zomato and Tiger Global of $120 million just about a year ago, which valued the company at $1 billion. This current valuation is at $570 million.

Markets have clearly do not like the deal of Zomato acquiring Blinkit and has given it a thumbs down. The share which had closed at Rs 70.35, the day the deal was announced on Friday, has slipped sharply to close at Rs 57.30, which was lower circuit on Wednesday. The loss over the last three days since the deal was announced is Rs 13.05 crore or 18.55 per cent. Clearly the street's verdict is against the deal.

June futures would expire on the first day of the reporting period 30th to 6th July. The current value of Nifty at 15,799.10 points is down 371.05 points or 2.29 per cent. It's virtually impossible for the bulls to win this round.

Coming to the period ahead, it will remain choppy and volatile. Strong resistances exist at the gap of 53207-54,205 level on BSE Sensex and 15,886-16,172 on NSE Nifty as mentioned earlier. While the indices entered the gap area on Monday, they were unable to fill the gap. For markets to continue to rally, they need to cross after filling the complete gap, which currently looks unlikely.

The strategy for the period would be to buy on sharp dips from only the large cap space and sell on rallies. Refrain from carrying short positions overnight as markets have a tendency to open with gaps which could be upward or downward. Over the period Monday to Wednesday there have been gaps opening on the positive side on Monday and negative side on Tuesday and Wednesday.

While various resistances exist around the 15,900-950 level and then at 16,050-16,150, supports are there at 15,450-15,550 and finally at 15,200. Markets would trade in a broad range of 15,450-16,050 in the coming period. Trade cautiously.

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