Market likely to trade with positive bias despite volatility

By Arun Kejriwal

Mumbai, Feb 24 (IANS) Markets were choppy last week and had a mixed performance. They lost for the first two days, then rallied for the next two and had a flat Friday to end the week with minor gains.

BSE Sensex was up 62.53 points or 0.17 per cent to close at 35,871.48 points. Nifty gained 67.25 points or 0.63 per cent to close at 10,791.65 points. BSE Mid-Cap was sharply up 1.64 per cent, while BSE Small-Cap gained even more and was up 2.00 per cent.

Dow Jones managed gains of 148.56 points or 0.57 per cent to close at 26,031.81 points.

After five weeks, the Friday fury has subsided. Over the previous five weeks, every Friday saw a Nifty stocks bearing the brunt and falling sharply on various grounds -- be results, corporate governance or regulatory issues. The stocks involved were Yes Bank, Dr Reddy's, Sun Pharma, Zee Entertainment and Tata Motors. Fortunately, this week we had none and this helped the market close with minor gains which were more widespread in the broader markets.

The Supreme Court has come down strongly on Anil Ambani and threatened to hold him in contempt of court if he does not pay the amount to Ericsson in the next four weeks. The easiest deal that can be done is selling the stake that Reliance Capital holds in Reliance Nippon Asset Management Company Ltd. This stake at current market prices would fetch Reliance Capital about Rs 5,000 crore.

The current market capitalisation of Reliance Capital is Rs 4,138 crore as of Friday's closing price of Rs 163.75 on BSE. A point to be noted is than Nippon is an equal stake partner in the company and is also managing the company on a day-to-day basis. This ensures that no due diligence is required for buying the additional stake.

The week ahead sees February Futures expire on Thursday, that is February 28. The current value of Nifty is lower by 39.30 points or 0.36 per cent. January Futures had expired at 10,791.65 points.

In the coming week, markets are likely to remain volatile as they have done in the past. Global cues are mixed, and the US-China trade wars don't seem to be getting anywhere.

The time frame for resolution, which was initially set by the two countries, has not yielded any results even though more than half the time has passed. With pressure on US President Donald Trump over the Mexican border wall mounting, one doesn't know what he could possibly do to divert attention and focus.

The strategy going forward would be to buy select stocks as the valuation looks more than attractive. Some of the PSU stocks seem excellent investments at current prices. If one is not confident of buying a stock, a good alternative would be to buy the two ETFs (exchange-traded funds) of PSU entities. CPSE ETF and Bharat 22 would be excellent bets in the current market where these shares have been hammered to prices which are less than intrinsic value of the underlying stocks.

Markets, even though volatile in the coming week, are likely to trade with a positive bias.

(The writer is founder, Kejriwal Research and Investment Services)