Uncertainty rules markets as Budget day nears

The week began on a positive note and the BSE Sensex hit the 50k mark within a very short time of markets opening on Thursday the 21st of January. Alas, after that level was achieved it was the only piece of good news as markets have been correcting non-stop thereafter. The BSE Sensex lost 2,382.19 points or 5.02 per cent in the four trading sessions to close at 47,800 points while Nifty lost 677.20 points or 4.85 per cent to close at 13,967.50 points. There was red all across the screen and hardly anything that survived the carnage. Reliance declared a decent set of numbers on Friday post-market close and it was expected that it would rally on Monday when markets opened. However, the complete contrary happened and the share tanked on analysts concern on lack of disclosures as the company chose not to declare GRM's (gross refining margins).

January futures expire tomorrow and the gains of the current month are all gone. The previous series expired at 13,981.75 points. We have closed at a negative 14 points for the series with one day to go. Bears have really attacked ferociously and pulled this series back from thin air. Tomorrow is another day and markets would remain volatile while the direction remains uncertain. It makes sense to remain on the side-lines and allow markets to move as they please and take stock specific positions only. Post expiry we have one day of trading left in the month and then budget 2021-2022. This time around even though there are wish lists from industries and various chambers of commerce, there are no 'leaks' about the budget. The only thing which is almost certain and known is the imposition of a Covid-19 cess. How much and in what form we would have to wait till the FM announces the budget on Monday.

Primary market continues to be in the news. The issues from Indigo Paints and Home First Finance Limited were subscribed 117.02 times and 26.71 times respectively. The only pending issue now is the one from Stovekraft Limited which would close for subscription on January 28. IRFC would list for trading on January 29.

Coming to the period January 28 to February 3, markets would be volatile and quite unpredictable. The Budget and post Budget period would dominate the markets for three days while expiry would determine volatility on the first day. In either case they would be highly volatile and most unpredictable. I would recommend taking a backseat from the markets till Monday afternoon, when the budget would have been presented and completed. There is little that the FM can offer in terms of sops with the limited resources available. There would be efforts made to revive the economy and measures to generate the multiplier effect through investments in infrastructure. How a nervous market reacts to these measures would be anybody's guess. The good part however is that with this correction of markets by 5 per cent, positions have been liquidated and made the market that much lighter.

The froth in the market has gone and investors have become a shade nervous seeing the continuous four days of fall. Whether today was the bottoming of the markets in the short term, not sure. Whether post budget we will rally, not sure. In uncertain times, step aside and wait for clarity. It's only a matter of two and a half trading days from now.

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