Markets continue gains but cautious strategy advisable

BY Arun Kejriwal

Markets were on a roll last week and gained on two of the three trading days. The benchmark indices also hit new highs on Tuesday and Thursday and saw profit taking on Thursday before a long-extended weekend holiday set in. The undercurrent remains strong and the tussle between the bulls and bears is deeply set in. Nothing is going to end in a jiffy for sure.

The BSE SENSEX gained 373.17 points or 0.96 per cent to close the week at 39,140.28 points. NIFTY gained 109.35 points or 0.94 per cent to close at 11,752.80 points. Markets saw the benchmark indices make substantial gains on Thursday and then recede on account of profit-taking.

BSE SENSEX touched a new life-time high of 39,487.45 points and then corrected to 39,083.16 points and finally settled at 39,140,28 points. NIFTY hit a life-time high of 11,856.15 points, and then corrected to 11,738.50 points before closing at 11,752.80 points.

The week gone by saw two IPOs list on Monday and Tuesday. Monday saw Metropolis Healthcare Ltd make its debut. Shares which were issued at Rs 880 saw the share gain on day one to close at Rs 959.55. They gained further on Tuesday, but lost on Thursday to close at Rs 966.25, a gain of Rs 86.25 or 9.80 per cent.

The other share to list was Polycab India Ltd with shares were issued at Rs 538. The share closed for the week at Rs 640.45, a gain of Rs 102.45 or 19.04 per cent. This issue had seen huge response from leveraged HNIs and was subscribed by them 110 times. Their cost of funding was roughly Rs 80-82.

The week ahead sees April futures expire on Thursday, April 25. This would be the last expiry before the election results. The action thereafter would shift to May series where the expiry is after May 23 when results would be declared.

The current value of NIFTY at 11,752.80 points is higher by 182.80 points or 1.58 per cent which is not very significant considering the volatility and the fact that we are around life-time highs. The bulls would like to build upon the advantage they have and not squander it away. Secondly, the fall or correction on Thursday has triggered an alarm and one would have to be wary of a correction in the coming days. This is not to suggest that the bull run is over.

Volatility would continue to rise and one would have a both direction market, hence forward rather than the by and large upward market. Also, one should expect a bigger move forward in the days hence.

Jet Airways has probably ended its life in its Silver Jubilee year. Its catch line, the joy of flying, had turned onto a nightmare in the last couple of months. It appears for sure that there was diversion of funds in the last few years of its existence as well-managed airlines do not grind to a halt in this manner.

Reliance Industries has issued yet another media briefing about it not having violated any US laws in dealing with Venezuela. Knowing the way Reliance operates, yet another briefing is completely unexpected and one can be reasonably sure that in this case, there can be no smoke without fire. This can be interesting development going forward and should be keenly tracked as the share is a heavy-weight in the benchmark indices.

The week ahead would have full five trading days and are likely to see larger moves. Trade cautiously and probably a change in strategy may be better advised instead of the earlier buy on dips and sell on rallies, it may be better to continue to sell on rallies and wait for buying opportunities.

(Arun Kejriwal is founder of Kejriwal Research and Investment Services)