Volatility to continue amid monthly F&O expiry

The period January 12-18 saw markets move in a broad band, gaining and losing both. Rallies over the last two days helped the benchmark indices register gains for the period under review. BSE Sensex gained 940.24 points or 1.56 per cent to close at 61,045.74 points, while Nifty gained 269.64 points or 1.51per centto close at 18,165.34 points. Markets gained on three of the five trading sessions.

Dow Jones gained on three of the four trading sessions. Of these, the three days of gains were continued, but markets in the US lost on Tuesday. DowJones gained 206.75 points or 0.61per centto close at 33,910.85 points.

The much talked about Follow on Offer from Adani Enterprises for Rs20,000 crore is expected to hit the markets during January 27-31. The issue would see applicants having to pay 25per cent on application which means the amount to be raised on application would be a fourth or Rs 5,000 crs. While the price band is yet to be announced, it could be at a discount of 10-12per centto the closing price of Adani Enterprises today. The share closed for trading on Wednesday at Rs 3,595.35. My gut feel for the price would be in the region of 800-850 for 25per centwith the total price being closer to Rs 3200-3350.

The days of FSN-Ecommerce or Nykaa seem to be down and under. People are questioning the business model of the company and particularly the part where Nykaa claimed it was a platform. A prominent Research house has challenged this statement. In any case, the bonus issue of five shares for every share held announced on October 3 has actually had a very negative impact on the share's performance. The company had issued shares at Rs1,125 and listed during November 21. The price which was trading around Rs 1,300 on the date of the bonus issue has since fallen to Rs 772, adjusted for bonus. The current price multiplied by six to reflect pre-bonus. Market has become smart and has learnt how to react to such bonuses which are not from profits of the business.

The current market movement could be the much-awaited pre-budget rally or could also be a feel-good factor on account of the mega FPO from Adani group, or a combination of both. The saving grace was the fact that Tuesday's rally saw FPIs making a small net purchase for the first time during the current calendar year. FPIs have sold every day in January till date. Whether this was an aberration or they believe that there is something in the markets in India, only time will tell.

Coming to the markets in the forthcoming period of January 19-25, there would be volatile moves dictated by budget expectations. With a trading holiday on Thursday (January 26) which is Republic Day, January Futures would expire a day earlier on Wednesday January 25. Expect a volatile Wednesday as people square out the series. The first resistance continues to be the previous top made around a fortnight back on January 3 at 61,343 and 18,265 points. It is very important that if there is to be a pre-budget rally, this level is to be crossed at the bare minimum. While this level is quite close, its important to not only cross the same, but also sustain the same. Probably the pre-budget rally and the mega FPO as a combination, may ensure the markets sustain any uptrend.

The strategy would be to keep positions light as markets would be volatile. Sell on any strong rallies and buy on sharp dips. If the resistance point is crossed there could be another 150-200 points move on Nifty corresponding to roughly 500 points on BSE Sensex. Trade cautiously.

(The author is the founder of

Kejriwal Research and Investment Services, an advisory firm)