Wait for sharp correction to build fresh positions

The truncated week with three sessions was eventful and dramatic. It was the end of the weekly, monthly, March futures expiry and also the end of the 2023-2024 financial year. Call it bear trap, NAV propping exercise, year-end flourish, we had a super volatile Thursday to sign off the year in style. Markets gained on two of the three trading sessions and lost on one. At the end of the short and eventful week, BSE Sensex gained 819.41 points or 1.13 per cent to close at 73,651.35 points, while Nifty gained 230.15 points or 1.04 per cent to close at 22,326.90 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.33 per cent, 1.34 per cent and 1.33 per cent respectively. BSE Mid-cap gained 1.34 per cent, while BSE Small-cap was up 0.92 per cent.

The Indian Rupee gained two paisa or 0.02 per cent to close at Rs83.40 to the US Dollar. Dow Jones gained on two of the four trading sessions and lost on two. Dow was up 331.47 points or 0.84 per cent to close at 39,807.37 points.

Thursday (March 28) was the last trading day of the financial year 2023-2024. It was also the day when March futures expired. This increased the volatility and one saw the effect of the same on the markets. Nifty made an intraday high of 22,516 points and closed at 22,326.90 points. This meant that Nifty lost 190 points from the high of the day. Nifty had gained on a net basis 203 points. Similarly, the intraday high on BSE Sensex was 74,190 points, while it closed at 73,651.35 points. This meant that BSE Sensex lost 540 points from the high of the day. BSE Sensex had gained 655 points on a net basis.

Coming to the quarterly performance of the benchmark indices, one finds that the net change during the quarter January to March 2024 was a fairly quiet one. BSE Sensex gained 1,411.09 points or 1.95 per cent, while Nifty gained 595.50 points or 2.74 per cent. BSE Mid-cap was up 2,482.96 points or 6.74 per cent, while BSE Small-cap was up 492.58 points or 1.15 per cent.

For the financial year 2023-2024, the gains have been spectacular and even though the current quarter was nothing great, the overall number is impressive. It may be also mentioned that the quarter January to March 23 (previous year) was negative and one saw the indices lose ground. BSE Sensex lost about three per cent, while Nifty lost around four per cent. Even the Mid-cap and Small-cap indices lost about five per cent and seven per cent. As a result, the annual gains were 24.85 per cent on the BSE Sensex, 28.61 per cent on Nifty, 63.40 per cent on BSE Mid-cap and 60.13 per cent on BSE Small-cap.

A question in the form of food for thought is, would financial year 2024-2025, see similar or near about similar gains? Without going into discussion, suffice to say that the year ahead would be tough and trying to match the benchmark returns of last year would be near impossible.

Expiry of March futures was on a positive note with the series gaining 344.10 points or 1.57 per cent to close at 22,326.90 points. More than 60 per cent of the monthly or series gains came on the last day when Nifty gained 203 points on a net basis.

The week ahead sees the offer for sale from Bharti Hexacom Ltd tapping the markets with its offer for sale of 7.5 crore shares in a price band of Rs 542-570. The issue opens on Wednesday (April 3) and closes on Friday (April 5). The selling shareholder is Telecommunications Consultants India Ltd (A Govt of India undertaking), which owns 30 per cent of the company. The balance shareholding is owned by Bharti Airtel Ltd, which is a listed entity. The company is in the business of providing communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in Rajasthan and the North East telecommunication circles in India which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. The services are offered under the brand ‘Airtel’.

The shares are being offered at valuations, which are between 12-15 per cent cheaper than the same for Bharti Airtel Ltd. While the business of the parent company and the company going public is not identical, it’s the best example available. The selling shareholder who is the government is selling half of its shares through this offering and would hold 15 per cent of the equity post this issue. There is a six-month lock in for the remaining shareholders post the listing of the shares. I believe the government sooner than later would look to monetise the remaining shares and sell them post the price discovery of this issue. In that case, investors who apply for this issue and are allotted shares, may have an opportunity to become a part of Bharti Airtel the parent company, as the possibility of this company being merged with the parent is a very bright possibility. Shares of Bharti Airtel trade are trading virtually at new lifetime high at around Rs 1,230.

The week ahead would see markets being volatile and choppy. While the sharp volatility of Thursday could best be explained as an aberration and something which is unlikely to be repeated, the benchmark has been raised. Markets would find it tough to remain at the elevated levels which they have reached. The stop loss for any long positions would be the lows made last week and earlier support of 21,900 points on Nifty and 72,300 on BSE Sensex. These should be taken as key supports and any dip below these levels would see sharp sell-off in the markets. On the upside, Thursday took us to new territory on Nifty and these are tricky waters to navigate.

The strategy would be to sell on strong rallies and wait for a sharp correction to enter. The picks should be large cap and very select midcap and small cap stocks. Trade cautiously.

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