Momentum with bulls, but bears are on the prowl

Arun Kejriwal

New Delhi: Markets continued their upward trajectory and added to their gains. At one point in time, BSE SENSEX had crossed 80,000 and registered gains of 10,000 points since the low made on June 4, when results for the elections were announced.

Ten Thousand points or 14.28 per cent is a spectacular gain by all standards and should be taken as a big positive. Markets are witnessing huge inflows where FPIs were caught napping with their bearish mindset, and on the other hand, domestic funds are flush with SIP funds, which have now begun crossing Rs 25,000 crore monthly. At the end of the week, BSE SENSEX gained 963.87 points or 1.22 per cent to close at 79,996.60 points, while NIFTY gained 313.25 points or 1.30 per cent to close at 24,323.85 points.

The broader markets saw BSE100, BSE200 and BSE500 gain 1.57 per cent, 1.71 per cent and 1.91 per cent, respectively. BSE MIDCAP gained 2.77 per cent, while BSE SMALLCAP was up 3.88 per cent. BSE SENSEX gained on three of the five sessions and lost on two, while NIFTY gained on four sessions and lost on one.

Benchmark indices made new lifetime highs, and the intraday high on BSE SENSEX was at 80,392.64 points and the closing high at 80,049.67 points, both of which were made on Thursday, July 4. The NIFTY intraday high was at 24,401 points, while the closing high was at 24,323.85 points. The intraday high was made on Thursday, while the closing high was made on Friday.

The Indian Rupee lost 10 paise or 0.12 per cent to close at Rs 83.48 to the US Dollar. Dow Jones gained on three of the four sessions and lost on one. It was up 257.01 points or 0.66 per cent to close at 39,375.87 points.

There is sector rotation happening, and this week, it was the turn of IT stocks. The BSE IT sector was the top sectoral gainer at 4.15 per cent. Besides the IT stocks, initial momentum was given by HDFC Bank as the FPI limit dropped below 55 per cent and fresh FPI buying emerged. This propped up the share, which rose from Rs 1,684 to a high of Rs 1,792 before profit-taking saw the share close at Rs 1,648, a weekly loss of Rs 36 or 2.14 per cent.

The date for the Union Budget has been announced as Tuesday, July 23, on expected lines. The week would also see July futures expire on Thursday, July 25, making that an extra volatile week. Keeping this in mind, the flow of IPOs on the main board seems to have taken a pause for the time being.

In primary market news, we had two listings and two issues opening and closing for subscriptions. The first share to list was Allied Blenders and Distillers Limited, which was listed on Tuesday, July 2. The company had issued shares at Rs 281. On the listing day, the closing price was Rs 317.85, a gain of Rs 36.85 or 13.11 per cent. By the end of the week, the price had moved up to Rs 343.90, a gain of Rs 62.90 or 22.38 per cent.

The second share to list was Vraj Iron and Steel Limited, which had issued shares at Rs 207. The share was listed on Wednesday, July 3. The share closed at Rs 251.95, a gain of Rs 44.95 or 21.71 per cent. Over the remaining two days, the price moved up to close at Rs 260.95, a gain of Rs 53.95 or 26.06 per cent.

The first issue to open and close for subscription was from Emcure Pharmaceuticals Limited. The issue consisted of a fresh issue of Rs 800 crore and an offer for sale of 1,14,28,839 shares in a price band of Rs 960-1008. The issue was subscribed overall 68.4 times, with the QIB portion subscribed 191.24 times, the HNI portion subscribed 49.32 times, and the Retail portion subscribed 7.36 times. There were 28.70 lakh applications in all.

The second issue was from Bansal Wire Industries Limited, which was subscribed 62.76 times overall. The price band was Rs 243-256. The issue consisted of a fresh issue of Rs 745 crore. The QIB portion was subscribed 153.8 times, the HNI portion was subscribed 54.21 times, and the Retail portion was subscribed 14.37 times. There were 21.65 lakh applications.

Markets need a correction to make them healthy. The timing is one that people are unable to guess. Whether there would be one before the budget or post-budget is a million-dollar question and has been speculated over the last couple of weeks. IT results will begin this week, with TCS announcing them on Thursday, July 11. This would be a crucial result as IT stocks have run up quite sharply on the expectation that the turnaround in IT stocks as far as results are concerned is here. Only results would clarify the same.

FPI activity in the markets is still confusing as they are alternating between buying and selling. Over the last three days, they were buyers in the cash market, whereas on the previous three days, they were sellers. Their short positions around the election results time have been reduced significantly.

Coming to the markets in the week ahead, expect sector rotation to continue. As a result, there would be volatility and sharp two-sided moves. In such a situation, taking a call is always difficult and would require swift action to be taken.

The market has momentum and plenty of participation, with newer stocks participating. What it lacks is depth, as on a number of days, we saw the market declines overshadowing gains, indicating that a few stocks prop up the markets. In such a situation, one needs to take some money off the table to invest if compelling opportunities present themselves.

With new highs once again being made, the mood and market optimism favour the bulls. However, the bears are waiting to put that one foot in the door and pounce on the bulls, who seem to have used up almost all their resources. In the coming week, I would expect the bears to make a comeback and gain control for the time being.

In conclusion, trade cautiously and, as mentioned earlier, expect sudden swings and change of mood in the markets.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)