Volatility may lead to more correction

While the bounce on Thursday made people believe that the worst is over, the fall on Friday has caused concern once again. It makes sense to lighten one’s exposure in the markets as we approach the end of the financial year 2023-2024 and enter the election period as well

Broader Markets In Red

• BSE-100, BSE-200 and BSE-500 lose 2.35%, 2.6% and 2.94% respectively
• BSE Mid-cap lost 4.02% and BSE Small-cap down 5.91%
• Beating in SMIDs impacted investor sentiment
• Indian Re lost 14 paisa or 0.17% to Rs82.88/$

The week gone by was extremely volatile and choppy. We began with a correction. Then a corrective up move, followed by a sharp correction, yet another corrective up move and then yet another correction.

Though markets gained on two of the five trading sessions and lost on three, the intensity of the fall has shaken the markets. It appears the momentum is lost and probably enough signals are available to indicate some more correction in the coming week.

One normally associates Friday the 13th as an ill-omen. This time we had a double whammy where markets fell sharply on the 13th and then fell again the following Friday (March 15).

So, in short the 13th and Friday individually hit the markets quite sharply. BSE Sensex lost 1,475.96 points or 1.99 per cent to close at 72,643.43 points, while Nifty lost 470.20 points or 2.09 per cent to close at 22,023.35 points.

The broader markets saw BSE-100, BSE-200 and BSE-500 lose 2.35 per cent, 2.6 per cent and 2.94 per cent respectively. There was worse to follow in BSE MID-CAP which lost 4.02 per cent and BSE Small-Cap, which was down 5.91 per cent. Very clearly the beating in midcap and small cap was quite severe.

The Indian Rupee lost 14 paisa or 0.17 per cent to close at Rs 82.88 to the US Dollar. Dow Jones lost on two of the five sessions and gained on three. It closed virtually flat, down 8.38 points or 0.02 per cent to close at 38,714.77 points. What is becoming worrisome in the US is once again inflation, and with present levels, it appears that the rate cut would just get postponed. Elections to the Lok Sabha have been announced and they will be held in seven phases beginning with the first phase being held on April 19. The remaining phases will be on April 26, May 7, May 13, May 20, May 25 and June 1. Counting would be held on June 4.

With the poll notification having been issued, the code of conduct is applicable with immediate effect and one would see political parties get to work on the business end of the elections.

The week ahead would be choppy and volatile and would trade with a negative bias. The movement over the previous week has seen markets getting shaken and losing momentum.

While the bounce on Thursday made people believe that the worst is over, the fall on Friday has caused concern once again. It makes sense to lighten one’s exposure in the markets as we approach the end of the financial year 2023-2024 and enter the election period as well.

There is multiple resistance between the current levels of the indices on the way upward till the top of 74,245 points on BSE Sensex and 22,526 points on Nifty, and we have just one support on the downside around 21,825-21,860 points on Nifty.

Last Wednesday, we touched a level of 21,905 points before we bounced on Thursday. The safety factor is not too big. If this were to break we would have a newer target of around 21,450-500 points which could cause a sharp correction in next to no time.

The strategy for the week ahead would be to remain in large cap stocks and use any rallies in the market to sell midcap and small cap stocks. There would be no policy statements going forward as the poll notification has happened and results for the fourth quarter and year ended March 24 are roughly four weeks away.

Brace for a volatile week and use rallies to sell and only sharp dips to do select purchases in the large cap space. Trade cautiously.

Primary markets saw a lot of activity in the week gone by. We had three listings of equity and one of a road Invit, one other issue which saw its issue open and close for subscription, and one other issue which had opened for subscription but would close on Monday.