Liquidity infusion to continue to drive markets

By Arun Kejriwal

December began on a promising note with the BSESENSEX gaining 500 points on the very first day of trading. After remaining flattish for the next two days, the week ended with yet another flourish with BSESENSEX gaining 440 points. The week ended with BSESENSEX gaining 929.83 points or 2.11 per cent to close at 45,079.55 points while NIFTY gained 289.60 points or 2.23 per cent to close at 13,258.55 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.58 per cent, 2.58 per cent and 2.57 per cent respectively. BSEMIDCAP was up 2.80 per cent while BSESMALLCAP gained 2.62 per cent.

The BSESENSEX made a new lifetime high of 45,148.28 points while NIFTY made a high of 13,280.05 points. Amidst the sectoral indices the top gainers were BSEREALTY and BSEMETAL which gained over 8 per cent each. There were no losers but the one to rise the least was BSEBANKEX, up 1.41 per cent. This would give an idea of the market depth which has increased significantly. A significant mover was the BSEPSU which gained 6.57 per cent. One saw shares like GAIL gain 16.83 per cent, ONGC 14.46 per cent and SAIL 13.42 per cent. There seems to be more steam left in this segment going forward.

The Indian Rupee gained 25 paisa or 0.34 per cent to close at Rs 73.80 to the US Dollar. Dow Jones gained 307.89 points or 1.03 per cent to close at 30,218.26 points. This incidentally was the high of the day and also the highest so far in the history of Dow Jones. For the year DOW is up 5.89 per cent.

The primary offering from Burger King India Limited was a 'WHOPPER' success. The company which had tapped the markets with its fresh issue of Rs 450 crs and an offer for sale of 6 cr shares was subscribed an overall 157.16 times raising over Rs 70,000 crs. The QIB portion was subscribed 86.48 times, HNI portion 357.45 times and Retail portion 68.79 times. There were 24.15 lac applications. The response generated clearly indicates that there are a large number of first timers who have applied for this issue.

RBI kept key interest rates unchanged on expected lines. It also spoke of the GDP for the remaining part of the current financial year 2020-2021 to continue to rise.

The rally in the Indian markets is being fuelled by huge inflows from FII's. In the first four days of the current month they have invested over Rs 10,000 crs so far. With the kind of liquidity and the investment not appearing to have moved to the midcap and Smallcap space so far, this rally still has steam left. This does not however mean that there will not be periodic corrections as time passes. On the contrary as we continue to trade in unchartered waters, the rally and corrections will be sharp and deep, though short lived. It is very important to stick to quality and fundamental stocks as the time has come where almost everything has started moving.

Covid-19 saw the world have 6,68,58,254 patients, 15,34,580 deaths and 4,62,44,499 patients recovering. In India we saw 96,44,529 patients, 1,40,216 deaths and 91,00,792 people recovering. Compared to the previous week the world saw 42,84,832 new patients, 76,271 deaths and 30,50,241 patients recovering. In India we saw 2,51,490 new patients, 3,483 deaths and 2,98,525 people recovering. The number of patients recovering compared to new cases is consistently declining in India for almost 8 weeks now. What is becoming more encouraging is the fact that number of active cases have now dropped to the 4-lakh mark or thereabouts. This is indeed heartening.

The week ahead would see markets build on the gains of the previous weeks. Volatility is expected to increase as one would also see people booking profits on select days which would lead to sharp corrections and days when continued buying leads to sharp rallies. Unlike previous weeks when sharp declines were to be used for buying, the strategy now would change to taking some money of the table. Historically markets tend to peak in the beginning of the new calendar year and the same was witnessed in January 2020 as well. It took the pandemic and 8 months after the low of March 2020 to bounce back and make new highs all over again.

Use sharp rallies to book profits and wait for meaningful correction to re enter the markets. With breadth increasing rapidly, one may also look at the better quality mid and small cap stocks which are yet to participate in the rally.

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

Source: IANS