RBI's move on policy changes a gain for markets

The period December 1-8 under review saw markets in wild and super volatile mode. Almost every day of the period saw BSE Sensex move four digits or 1,000 points upwards or downwards and Nifty on an average 300 points. Markets gained on three of the five days and lost on two days. The final change after the wild week saw BSE Sensex gain 964.89 points or 1.65 per cent to close at 58,649.68 points while Nifty gained 302.85 points or 1.73 per cent to close at 17,469.75 points.

Dow Jones after being under pressure for some time saw a smart recovery and gained 1,235 points or 3.58 per cent in the five-day period. The all time high for Dow Jones is 36,566 points.

RBI in its bi-monthly MPC policy meet kept all key rates unchanged and voted 5-1 to continue the same.

In primary market news, we had three issues closing for subscription during the period under review. The first which received a tepid response was from Star Health and Allied Insurance Company Limited. The issue failed to get fully subscribed and had to resort to reducing the offer for sale size. It's a body blow to the dozen merchant bankers who had brought this issue at extremely high valuations.

The second issue was from Tega Industries Limited which received overwhelming response from QIB's and was subscribed an overall 219 times. QIB portion was subscribed 215.45 times and has become the highest subscribed issue in the QIB category in a decade, overtaking the subscription of HDFC AMC.

The third issue was from Anand Rathi Wealth Limited which was subscribed 9.78 times. The company had tapped the markets with its offer for sale of 1.2 crore shares in a price band of Rs 530-550.

There was one listing from Go Fashion (India) Limited which had tapped the markets and issued shares at Rs 690. Shares had a flying debut and closed day one at Rs 1,252.60, a gain of Rs 562.60 or 81.54 per cent. They have lost some ground since then and closed at Rs 1,176.30, a gain of 70.47 per cent.

There seems to be a flood of IPOs in the last couple of weeks of December. The issues from Rategain Travel Technologies Limited and Shriram Properties Limited have already opened for subscription and would close on Thursday and Friday respectively. The issues from C E Infosystems Limited would open on Thursday the 9th of December and close on Monday the 13th of December. The price band is Rs 1,000 – 1,033.

The issue from Metro Brands Limited opens on Friday (December 10) and closes on Tuesday (December 14). The issue consists of a fresh issue for Rs 295 crores and an offer for sale of 2.14 crore shares in a price band of Rs 485-500.

The issue from Medplus Limited opens on Monday the 13th of December and closes on Wednesday the 15th of December. The issue consists of a fresh issue of Rs 600 crores and an offer for sale of shares worth Rs 798.29 crores in a price band of Rs 780-796.

Markets have been super volatile and are likely to remain the same in the coming period under review from 9th December to 15th December. There are a couple of factors that need to be carefully watched which will determine which way markets go. Firstly, the threat of 'Omicron' seems to have diminished or the threat perception of the same has reduced. While covid-cases are being closely monitored the alarming situation of Monday seems to be behind us.

Secondly, FII's have been big sellers and have in the month of November sold equity worth 4.5 billion US Dollars. Their selling continues in the current month of December and this could be a serious cause of concern going forward.

Thirdly while Dow Jones has recovered last week, its performance would be closely monitored and global markets would take a cue from this. Considering these three crucial events it makes imminent sense to follow a strategy of buying on sharp dips and selling on strong rallies.

This strategy would have been very successful in the last period under review and given you opportunity to trade on every single day. Continue with the same. Considering the fact that RBI has not changed any key rates, the Banking sector which has been under pressure could be a good spot to gain in the coming days if markets continue to gain. Trade cautiously.