Markets to remain volatile with downward bias

By Arun Kejriwal

The week gone by saw markets begin the week with a loud thud and falling sharply. BSE SENSEX lost 2,002 points while NIFTY lost 566 points on that single Monday and that was pretty much the story of the week with markets remaining just about there. The difference was the intraday volatility which increased significantly. An example of the same was the intraday difference on Tuesday which saw BSE SENSEX make a high of 32,264 points and a low of 31,403. The intraday swing was 861 points and the closing difference at 31,453 points was 262 points. This was witnessed virtually on all the trading days and is a marked difference from what one saw in April.

BSE SENSEX lost 2,074.94 points or 6.15 per cent to close at 31,642.70 points while NIFTY lost 608.40 points or 6.17 per cent to close at 9,251.50 points. The broader indices saw BSE100, BSE200 and BSE500 lose 5.97 per cent 5.86 per cent and 5.75 per cent respectively while BSE MIDCAP lost 4.91 per cent and BSE SMALLCAP 4.17 per cent. There were no sectoral gainers and the one to fall the least was BSE HEALTHCARE down 0.40per cent.

The Indian Rupee lost 43 paisa or 0.57 per cent to close at Rs 75.54 to the US Dollar. Dow Jones rose 607.63 points or 2.56 per cent to close at 24,331.32 points.

Reliance was the star performer at the bourses last week and gained Rs 95 or 6.48 per cent to close at Rs 1,562. During the course of the week it also announced two stake sales in Jio Platform to Silver Lake of 1.15 per cent and to Vista of 2.32 per cent. These stake sales would raise Rs 5,655 cores and Rs 11,367 crores respectively. This has been done at a valuation of Jio Platform of Rs 4.9 lakh crores and is at a 12.5 per cent premium to the stake sale to Facebook. Further the company has fixed the record date for rights entitlement as Thursday the 14th of May. There would be an electronic credit of the right in the demat account in which shares are currently held.

Markets have become choppy on expected lines and going forward the same would be the order of the day as the commentary from companies declaring results about the immediate future becomes known. Labour laws have been changed in three to four states for the next 1,000 days and more states would follow with similar guidelines. Migrant labour is returning to their home states and this would cause an issue for reopening of industries with labour being unavailable.

It's a good time to look at going forward what industries would be affected as a result of covid-19. There is no doubt that every single industry and sector would be affected in the short and medium term. The extent would differ from sector to sector. However, some sectors would undergo a see change post covid-19 recovering. Let us look at some of the sectors that would be badly hit. Top of the list would be Travel and tourism, hospitality, entertainment and lifestyle sector. Expanding this would include airlines, hotels, restaurants, malls and shopping centres and multiplexes. Sporting events and live programs would take a backseat. Yet another sector which would be hit is the commercial real estate space as many corporates which were the users of this facility are having a relook at working from home as a longer-term viable option. The biggest gainer without doubt is the healthcare sector which includes pharmaceutical manufacturers and healthcare providers like hospitals and clinics. Indian companies in the chemical space too would benefit as the world looks to outsource intermediaries and bulk drugs from the Indian manufacturers rather than China. In the longer term FMCG companies too would have an advantage as consumers look to buy quality rather than price.

In the next few quarters, the world would be reinvented and many sectors would have to change from the way business was being done and the way it would be done going forward. An example of what I am talking would be the simultaneous release of a new Hollywood/Bollywood film on the internet where you pay for seeing it on the net and completely avoid going to the theatre. A sporting event happening without spectators is already happening and the idea is to keep the sport alive. Box office and gate collections will remain a thing of the past for quite some time.

On the covid-19 front the number of patients globally has gone up to 41.03 lac cases, with 2.80 lac deaths and 14.43 lac cases recovering. In India the number of patients affected has gone up to 62,939 cases with 2,109 deaths and 19,358 patients recovering. Since last week the number of patients increasing globally is 6.07 lac, while those recovering has gone up to 3.17 lakh. Number of deaths in the week is roughly 35,000. In India in the same period the number of cases has increased by 23,000 while patients recovered is 8,500 and deaths are 786. For the curve to start trending down we have a long way to go.

Coming to the markets in the week ahead, volatility would be the order of the day. There is uncertainty about the lockdown being lifted totally and the plans to restore the economy to near normalcy seem a long way off. How to balance the delicate equation of life and work and medium-term sustenance is the challenge. In such circumstances the strategy in the market would be to sell on rallies and buy only on sharp dips.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal.)

Source: IANS