Volatility may continue ahead of Budget

The January 19-25 period under review was a tough one for markets. They lost on the first two days of the period, made gains on Monday, were sideways on Tuesday and then fell sharply on Wednesday. Why they fell on Wednesday, is still a mystery as global cues overnight from the US or world markets on Wednesday, did not warrant such a move. At the end of the period, BSE Sensex lost 840.68 points or 1.38 per cent to close at 60,205.06 points, while Nifty lost 273.40 points or 1.51per centto close at 17,891.95 points. Due to the Republic Day holiday on Thursday, January Futures expired a day earlier. The Jan series ended at 17,891.95 points, a loss of 299 points or 1.64per cent.

Dow Jones gained on three of the five trading sessions during the period under review. It ended the period with losses of 177.26 points or 0.52 per cent to close at 33,733.96 points.

The mega FPO from Adani Enterprises Limited for Rs20,000 crore would open from Friday (January 27) and close on Tuesday (January 31). The price band is Rs3,112 to 3,276 per share. Half the amount is payable on application and the balance would be in one or more calls. There is a discount of Rs64 per share to be deducted upfront for retail investors. This means that retail investors would pay Rs1,574 per share when making an application in the FPO, which has a lot size of four shares.

Shares of Adani Enterprises Ltd have had a dream run in the last 12 months on the bourses. The close as on January 31, 2022, was Rs1,716. From there they rose all the way to Rs4,190 in December 2022. The low during the period was Rs1,530 in February 2022. On the day of the announcement of the price band of the FPO on January 18, the price was Rs3,595. Since then, the share has shed Rs193 or 5.36per cent to close at Rs3,402. A great deal of comfort for retail investors is lost in this price erosion in a share which has been highly volatile.

The comfort comes from the fact that the share is partly paid and just half the amount would have been paid on application. For the company to raise the balance amount, it is imperative that the market price of the share is way above the issue price or retail investors would just not pay up the call money. More on the issue in a separate article tomorrow.

Markets are making heavy weather of the so-called pre-budget rally. Each time we come close to the resistance zone or break-out zone; markets fall. Similarly, the support zone seems to be holding strongly and giving support to the market. Broadly speaking markets are trading in a broad zone between levels of 59,625-59,675 on BSE Sensex and at 17,760-17,795 on Nifty on the lower side and 61,343 on BSE Sensex and 18,265 points on Nifty on the higher side. With each passing day these levels are becoming that much tougher to surmount.

What does the budget to be presented on coming Wednesday have in store for markets? Very tough to tell considering that with less than three trading days left, there is no significant activity in the marketplace. This is a budget which would have things for the salaried class and middle class for sure. Yet growth, development and infrastructure cannot be left behind.

The period 27 January to 1 February will be filled with expectations and assumptions about the Budget.

Expect markets to be volatile and keep one eye on fine print and the other on global cues. Clarity on the way things are, would emerge only in the afternoon of February 1, post budget. The strategy would be to keep it simple and avoid large positions. We have key defined levels for the markets. Until and unless there is deviation beyond these limits, all is hunky dory.