Time to focus on mid, small caps

The period 4th May to 10th May was super volatile and choppy. Markets are trying to find a trend and are respecting support and resistances. BSE Sensex gained on two days, lost on one and was flat on the fourth day. The last day of the period under review on Wednesday saw markets alternating between gains and losses and finally closing positive. BSE Sensex gained 840.20 points or 1.38 per cent to close at 61,940.20 points while NIFTY gained 245.10 points or 1.36 per cent to close at 18,315.10 points.

Dow Jones lost in four of the five trading sessions. Concerns post the Fed hike seem to keep the market tense. The small regional banks are under tremendous pressure and not because of poor health or financial performance, but because of mark to market losses on account of rising interest rates.

Thursday saw BSE Sensex gain 550 points, lose 700 on Friday and gain 700 points on Monday. On NIFTY, there was similar movement with 160 points up, 185 points down and 195 points up. While Friday was explainable to the MSCI clarification on weightage of HDFC twins post the merger, the other two days were without explanation.

Shares of Mankind Pharma Limited which had tapped the primary market with its offer for sale of approximately 4 crore shares at Rs1,080, listed on Tuesday the 9th of May. It was a blockbuster listing and did extremely well gaining over Rs344.95 or 31.93 per cent. The issue has done extremely well and all successful applicants have made money. Hopefully this issue could be a reason for revival of the IPO markets. One may hope it does enthuse the market and boost confidence. Shares of Mankind lost some ground on Wednesday and closed at Rs1,381.80, down Rs43.15 or 3.12 per cent.

The REIT issue from Nexus Select has opened. Wednesday is the second day of the issue and it will close on Thursday the 11th of May. At the time of writing the article, the issue was subscribed 0.54 times overall with the QIB portion subscribed 0.17 times and the non-QIB portion subscribed 0.98 times.

The issue would be comfortably oversubscribed and one could expect the non-intuition portion to be subscribed between 5-7 times.

ONDC is a platform which is now being used to order food like Zomato and Swiggy. This platform is substantially cheaper than what Zomato charges and the faster adoption of the platform could be cause for worry for an already struggling Zomato. Currently the app offers free service and is attracting customers in a big way. They would be forced to cut prices of deliveries and would have to bring back restaurant prices to normal without their surcharge sooner than later. At the end of it all competition ensures a better deal for the customer. Zomato better watch out.

The period under review, 11th May to 17th May, would see results of elections held in Karnataka being declared on Saturday the 13th of May. Based on the outcome of the results there could be some knee-jerk movement on Thursday post the exit poll and some more movement on Monday when markets re-open post the weekend.

Markets have become choppy and volatile on expected lines, and action has shifted to the midcap and Smallcap space. This would be the trend going forward and markets would make attempts to cross the all-time highs made on 1st December 2022. While we still have some distance to go, they will make an attempt and keep investors and traders confused.

We are at immediate support or resistance zones as one looks at it with current levels of 18,300-18,350 being resistance on NIFTY and 61,950-62,100 on Sensex. Assuming this is crossed the next level would be at 18,500-18,525 and 62,550-62,650 levels. If these are crossed then all-time highs would be under threat. On the support side, levels of 18,050-18,100 and 61,200-61,350 would be first levels. These would be followed by levels of17,600-17,650 and at 59,700-59,850.

The strategy for the period ahead would be to concentrate on stocks from the midcap and Smallcap space where the action is and would remain. Use strong and sharp rallies to sell and sharp dips to re-enter markets. Intraday volatility would be the order of the day. Trade cautiously.

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