Trade cautiously!

The week ahead has a trading holiday on Thursday, and would therefore see some profit taking on Wednesday as there is an extended break, with the holiday confined to India…reports Arun Kejriwal

The week gone by consisted of five trading sessions and markets gained on three of the five sessions.

On Friday, markets were up a tad with BSESENSEX up a mere 21 points while NIFTY was down 1 point. BSESENSEX gained 596.87 points or 0.81 per cent to close at 74,248.22 points while NIFTY gained 186.80 points or 0.84 per cent to close at 22,513.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.14 per cent, 1.62 per cent and 2.12 per cent respectively. BSEMIDCP was up 3.84 per cent while BSESMALLCAP was up 6.64 per cent. The new highs on BSESENSEX was at 74,501.73 points while it was at 22,619 points on NIFTY.

Indian Rupee gained 10 paisa or 0.12 per cent to close at Rs 83.30 to the US Dollar. Dow Jones gained on two of the five sessions and lost on three. Dow lost 903.33 points or 2.27 per cent to close at 38,904.04 points. The US markets are worried about the FED not cutting interest rates in the immediate short term. With employment data and the economic indicators pointing to a roaring economy, one wonders whether a cut would be appropriate at all. Further, the concern about high inflation seems to have taken a back seat and the Central Bank is not too sure about the impact that a rate cut could do to contain inflation. This probably explains the sharp fall in the markets.

RBI decided to keep rates unchanged and believes that inflation is being tamed. While inflation is cooling off, RBI Governor Shaktikanta Das ‘would like the elephant to return to the forest’. With the country in the midst of elections for the Lok Sabha, no one expected any rate cut this time around.

In primary market news, we had one listing and one issue opening and closing for subscription during the week. There is no issue expected during the coming week on the main board.

Shares of SRM Contractors Limited who had issued shares at Rs 210 listed on the bourses on Wednesday, April 3. The share debuted on day one at Rs 225 and closed at Rs 236.20, a gain of Rs 26.20 or 12.47 per cent. By Friday, the share lost some ground and closed at Rs 228.30, a gain of Rs 18.30 or 8.71 per cent.

Bharti Hexacom had tapped the capital markets with its offer for sale of 7.5 crore shares in a price band of Rs 542-570. The issue was subscribed 29.88 times overall with QIB portion subscribed 48.57 times, HNI portion subscribed 10.51 times and Retail portion subscribed 2.82 times. There were 6.16 lakh applications in all. The shares being offered in the IPO are by the Government who is selling half of its 30 per cent shareholding.

The week ahead has a trading holiday on Thursday, and would therefore see some profit taking on Wednesday as there is an extended break, with the holiday confined to India. The upside resistance for the markets would be the new highs made last week at 74,501 points on BSESENSEX and at 22,619 points on NIFTY. Support exists at the lows made at 72,416 and at 21,710 points. While these levels seem quite far away currently, they are good levels to fall back on if new long positions are to be initiated for the medium term.

Expect markets to trade with sharp and two-sided moves. There would be a lot of intraday movement and markets looking to decide a trend. In terms of FPI activity, it seems to be a mixed bag with them being buyers on some days and sellers on other days. Domestic institutions or funds have a continuous supply of flows from retail investors which makes them net buyers on more or less a continuous basis. The state of markets with their being at new highs, ensures a steady flow of new equity paper in the form of QIPs and OFS. This comes from promoters and PE investors and also ensures that appetite for new paper is continuously met. It also ensures that the supply-demand mismatch does not happen and causes markets to spike because of supply constraints.

The strategy for the week would be to buy on dips and sell on rallies. While the all-time highs are almost there, one needs to be cautious at these levels while maintaining a balance that if the same is crossed there could be a sharp up move as well. Caution needs to be exercised at the same time towards there being a stock rotation where different stocks move and markets remain around the same levels. Action in midcap and small cap space is again opening up and select counters from this space can be looked at. The first of the IT results would be declared by TCS on April 12. Hopefully, this would set the trend.

In conclusion, while things look rosy and promising, it’s that time in the markets where one needs to be extra careful where a reversal also can happen any time.

Trade cautiously.

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