Will Sensex set next record high as mkts in final stages of rally?

Markets in the June 3-9 period continued to remain volatile and choppy. BSE Sensex gained 92.15 points or 0.18 per cent to close at 51,941.64 points. Nifty gained 39.15 points or 0.25 per cent to close at 15,800.45 points. They gained on two of the five trading days. Today was a really choppy day with markets gaining in the early part of the day and then falling sharply. They did regain some of the sharp losses, yet lost about 0.7 per cent today. It is significant to note that while Nifty has been making new lifetime highs, BSE Sensex is yet to cross its lifetime high of 52,516.76 points made on February 16, 2021. The highs made on BSE Sensex in this rally is 52,446.92 points, while it is 15,800.45 points on Nifty. Very clearly the small gap of a mere 70 points remains on the BSE Sensex, yet it is already nine trading days that have passed in the current June series since Nifty crossed the lifetime high first. This is an unusual thing and has not happened for a fairly long time.

Will a further fresh high be achieved in the next couple of days or take longer? The answer is it could be longer as the momentum, which was being built seems to have broken and with Wednesday's fall, markets need to regain their momentum and then make an effort to cross the high, which is almost 600 points away.

One other thing that needs to be highlighted is that there is a state of euphoria in the markets as far as the mid-cap and small-cap stocks are concerned. Different stocks see huge volumes and price surges on different days and the movement and price rise are almost unexplainable. Readers would recall last week, when I had explained about PNB Housing. This stock made a high of Rs924 on Tuesday and has now retraced or corrected to Rs 810.70. The upper circuits have certainly stopped for the moment.

The week ahead sees two IPO's hitting the market. The first issue is from Shyam Metalics and Energy Limited, which is tapping the markets with its fresh issue for Rs 657 cr and an offer for sale of Rs 252 cr in a price band of Rs 303-306. The issue opens on Monday, June 14, and closes on Wednesday, June 16. The company is an integrated player in the steel manufacturing sector and has an installed capacity of 5.71 lakh tons, which would be doubled to 11.6 lac tons over the next two to three years.

The second issue is from Sona BLW Precision Forgings Limited, which is tapping the capital markets with its issue of Rs5,550 cr, which consists of a fresh issue of Rs 300 cr and an offer for sale of Rs5,250 cr in a price band of Rs 286-291. The company is an automotive technology company, which is a critical supplier to OEMs in the passenger vehicles, commercial vehicles and tractors space. It is also a supplier of components to electric vehicle makers. This issue also opens on Monday, June 14, and closes on Wednesday, June 16.

Coming to the markets in the June 10-16 period, they would continue to remain volatile and choppy. Markets would like to make fresh highs on the BSE Sensex probably on the coming Monday as markets tend to begin the calendar week on a positive note. In the meanwhile, the frenzy being witnessed in small and mid-cap stocks would continue unabated. Its time to book profits in the mid and small-cap space. Move out of those stocks, which have moved sharply in this space and avoid investing in them at current prices as valuations for most of them are unexplainable. Large-cap stocks movement alone would help make the inevitable new high on BSE Sensex. Finally, markets need a breather once the high is made. Allow that to happen and markets to go into a correction mode thereafter. Wait for the same and be patient. We are in the final stages of this rally.

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