Volatility May Continue For Some More Time

The period under review from 7th November to 13th November was a tough one for the markets and one that people would like to forget in a hurry. Markets took a beating on virtually the entire period with one flat day on the BSE-SENSEX. NIFTY lost on all five trading sessions. The period saw BSE-SENSEX lose 2,687.18 points or 3.34 per cent to close at 77,690.95 points while NIFTY lost 927.30 points or 3.79 per cent to close at 23,559.05 points. This time midcap and small cap stocks also came under selling pressure and the retail mantra of buy on every dip just did not work. It has now changed to sell on any rally but that too does not seem to be happening. It’s tough time out there.

Post the US elections its euphoria time currently. Markets seem to have taken off and are riding on top of a wave with no sense of reality. Corrections from such a state are overdue and are normally a hard landing. Markets gained on three of the five trading sessions, were flat to the extent of moving between decimal points on the fourth day and lost on Tuesday. At the end of it all, Dow gained 1,689.10 points or 4.00 per cent to close at 43,910.98 points. It may be mentioned that the gains made on Wednesday were 1,508 points. Leaving that aside, the remainder over four days was just 181 points, insignificant.

In primary market news, we saw three listings during the week. The first was Sagility India Ltd which had issued shares at Rs30. The discovered price on BSE on Tuesday the 12th of November was Rs31.06, a gain of Rs1.06 or 3.53 per cent. After touching a high of Rs32.90, the share fell sharply to close at Rs29.36, a loss of Rs0.64 or 2.13 per cent. By the end of Wednesday, the share fell further to close at Rs28.61, a loss of Rs1.39or 4.63 per cent.

The second share to list was Swiggy Limited which had issued shares at Rs390. Prior to the issue opening, the company had leaked stories to the media that the issue was very heavily oversubscribed by Anchor investors and that bucket had received a subscription of 25-35 times the reservation. Today when the basis of the allotment issue was released the anchor allotment was 13,03,85,211 equity shares which effectively means that there was no overwhelming demand for the issue. What this kind of wrong information and cheap publicity benefits the company is indeed surprising. The regulator needs to haul up the company and its merchant bankers for leaking wrong information and misleading the public at large. Hope something happen to curb this nuisance.

The discovered price was Rs412 on BSE and Rs420 on NSE. The discovered price on NSE meant different things to different people and there were comments about the price on social media. The high of the day was Rs465.80 while the low was Rs391. The share closed at Rs456, a gain of Rs66 or 16.92 per cent.

The third share to list was Acme Solar Holdings Limited which had issued shares at Rs289. The discovered price was Rs251 on NSE and Rs254.50 on BSE. The highs made were Rs279 on BSE and Rs276.10 on NSE. The closing price was Rs253.15 on BSE, a loss of Rs35.85 or 12.40 per cent.

The relentless flow of IPOs is not helping matters either and we have a majority of them listing at or around the issue price. This is shaking the confidence and sucking out liquidity from the system as well.

During the period under review, markets have decisively broken key support of 23,800-23,850. Going further down, we have a minor support around 23,500-23,550 points and solid support around 23,100-23,150 points. Looking at the market setup where quarterly results are well below expectation and FPI selling continues over the last 45 days unabated, any meaningful recovery in the short to medium term looks unlikely. On the upside, strong resistance is at levels of around 24,100 points.

The period ahead from 14th November to 20th November has a trading holiday on Friday the 15th of November. This will make markets choppy and volatile on Thursday. The trading strategy for the period ahead would be to do trades only in the large cap space as there still exists safety in this segment. The small cap and midcap segments are becoming volatile and with selling pressure hitting them, it’s difficult to assess where and what stocks or sectors would come under selling pressure. There is pain in the markets and more would unfold. The best would be to stay away for some time from markets and allow them to find their own levels. While that is very difficult, the best that could be done is wait for the next meltdown like what we saw today. Be greedy and choosy while selecting stocks and choose only large cap stocks. Trade cautiously.

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

an advisory firm)