Stay Focused On Large-Cap Stocks Amid Uncertainty

The December 12-18 period was a highly volatile one for the markets. There is a very superstitious date in market parlance, which is Friday the 13th and it was eventful in no mean way. Markets fell very sharply and then rebounded with equal fury, to not only recover the losses, but rise almost 2/3rd of the intraday losses. While many thought this as the beginning of the Santa Claus rally, nothing of that sort happened. BSE Sensex lost 1,343.94 points or 1.65 per cent to close at 80,182.20 points, while Nifty lost 442.95 points or 1.80 per cent to close at 24,198.85 points.

Dow Jones had a torrid time and incurred small losses on each of the five trading sessions. At the end of it, it was down 797.93 points or 1.80 per cent to close at 43,449.90 points.

Coming back to Friday the 13th and the impact it had on markets. The previous day (Thursday) saw BSE Sensex close at 81,299.96 points and Nifty at 24,548.70 points. The intraday lows registered were at 80,082.82 points and 24,180.80 points, a loss of 1,217.14 points and 367.9 points. Thereafter came the rally which saw markets hit a high of 82,213.92 points and 24,792.30 points. Thus, the intraday gains were at 2,131.10 points and 611.50 points. If one were to compute the intraday volatility which includes the losses and then the gains it would be a staggering 3,348.24 points on BSE Sensex and 978.40 points on Nifty. The net change for the day was at 843.16 points on BSE Sensex and at 219.60 points on Nifty, which is not anything out of the ordinary. It’s the intraday which caused the tremors and due to there being no event or series of events to justify the same, could be attributed to Friday (December 13).

In primary market news, this is the time when normally issues do not happen. In the period ahead we have as many as eight issues opening and closing and it seems like a mad rush. In continuation of this madness, we saw three issues listed on Wednesday. These issues had closed on Friday the 13th of December.

The first to list was Mobikwik which had issued shares at Rs279. The share was very well subscribed and being a small issue received excellent response. The share debuted at Rs442.25 and towards the end of the day’s session hit the upper circuit at Rs530.70. The share closed marginally lower at Rs530.30 with gains of Rs251.30 or 90.07 per cent.

The second share to list was Vishal Mega Mart Ltd, which had issued shares at Rs78. The discovered price was Rs110 and the closing price Rs111.95. The gains were a very healthy Rs33.95 or 43.52 per cent.

The third and final share to list was Sai Lifesciences Ltd, which had issued shares at Rs549. The discovered price was Rs660 and the closing price was Rs765.30. The gain was Rs216.30 or 39.39 per cent. All three listings have been great for the investors who were allotted shares. The outstanding share was Mobikwik without doubt.

The December 19-24 period would end one day earlier because of the holiday on Wednesday (December 25) on account of Christmas. The following period would begin with December futures expiring on Thursday. This would put pressure on the markets when they close for an early holiday on Tuesday. The current series gain for December is 284.70 points or 1.19 per cent. It’s not significant and looking at the sharp fall over the last three days, things could go anywhere.

Coming to the markets in the week ahead, we did on Friday the 13th, manage to cross and close above the 24,750 level on the Nifty. While the milestone was achieved the intraday volatility has shaken the markets and it would be safer to wait for confirmation of higher high and higher lows on the indices before jumping to conclusions. In terms of resistance the next levels are at around 25,050-25,100 points on Nifty and at 82,900-83,100 points on BSE Sensex.

Once this is taken out, the next resistance would be around 25,250 points or 83,550 points. These would be much tougher to break and sustain. On the downside we have support at 24,250 points and 80,500 points respectively. If these levels are broken, we have the next support zone at 23,850 and 79,300 points respectively. Though FPIs were aggressive buyers on Friday they sold much more over the next two days and suffice to say that they got a golden opportunity to flip things on Friday. We are back to square one and there could be pressure going forward.

The US FED meets tonight to review interest rates and a 25 basis point cut is given. Looking at the jitteriness in US markets post the meeting, the commentary from the FED and what it indicates. We would know the outcome before the markets begin trading on Thursday morning and it would be interesting seeing what happens. Two other Central Banks would be meeting in the remaining part of the week.The trading strategy would be to look for safety in large-caps as the movement in small cap and midcap is very wild and unpredictable. Trade cautiously!

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

an advisory firm)