Refrain From Dabbling In Mid- & Small-Cap Stocks

The February 20-25 period under review had a mere four trading sessions because of a holiday on Wednesday on the occasion of Maha Shivratri. The domestic stock market lost on three of the four sessions and gained on one where BSE Sensex gained and Nifty lost. At the end of the period, BSE Sensex lost on three of the four sessions, while Nifty lost on all four of the sessions. BSE Sensex lost 1,337.06 points or 1.76 per cent to close at 74,602.12 points, while Nifty lost 385.35 points or 1.68 per cent toclose at 22,547.55 points. The weakness in mid-cap and small-cap sectors continues. As far as FPIs selling is concerned they seem to be carrying on in the same manner with no sign of any let up. While domestic institutions have been buying every single day, their buying is falling short and therefore on a net basis the markets are falling.

Dow Jones lost on two of the five sessions and was down on another two. The fifth session was flat. At the end of it all, Dow lost 935.18 points or 2.10 per cent to close at 43,621.16 points.

Previous support levels of 22,700-800 points on the Nifty were easily broken this time around. The fall or break was so smooth as a knife through butter. What this means for the market is that we have to look for new levels of support and also that this support which withstood quite a bit ofbattering will itself become a resistance going forward.

In primary market news, we had the listing of Quality Power Electrical Equipments Limited, which listed on Monday (February 24). The issued price was Rs425. The share debuted at Rs432.05 and closed on Monday at Rs387.05, a loss of Rs37.95 or 8.92 per cent. On Tuesday, the share recoveredsome ground and closed at Rs397.35, a loss of Rs27.65 or 6.50 per cent. Very clearly the market in itspresent mood is very harsh on any IPO where the valuation is stretched. It does not spare anyone.

In terms of IPO pipeline, while the same is very strong, we seem to have no brave companies alongwith their merchant bankers who are willing to hit the markets. We are awaiting the next issuewhich would tap the markets on the main board.

The new Sebi chief would be announced any day now as the incumbent steps down after completingher term. One is likely to see a bureaucrat take over the post.

The February 27- March 5 period under review in the coming week would see February futures expire on the very first day. The present value of the series at 22,547.55 points is lower by 701.95 points or 3.02 per cent. It would be a tall order to expect the bulls to reverse the present scenario. Expect the bulls to put up a fight to regain some of the losses from a lost cause. Considering the intervening holiday and continued FPI selling, it looks tough for the bulls to do much.

Markets in the period ahead have to build on a new base after finding support at a new lower level with 22,700-22,800 having been decisively broken and sustained. This would take some time as weare yet to bottom out and no indications of the same happening are visible. New support levels existat 22,300-400 points on Nifty and at 73,800-74,100 points on BSE Sensex. If these are broken, we are looking at a round figure on Nifty of around 22,000 points. On the upside it appears that levels of 23,250-23,300 and 76,650-76,800 would be very strong and tough to overcome.

Of course, the previous supports broken this time around at 22,700-22,800 would act as immediate resistances. The trading strategy would be to look for safety in large-cap stocks and refrain from dabbling in mid-cap and small-cap stocks unless they have been researched and short listed by you. Trade cautiously and wait if you are looking to make a portfolio for yourself. Allow markets to stabilize as currently we have more uncertainty and volatility than desirable.

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

an advisory firm)