Indecisiveness of markets and volatility to continue

By Arun Kejriwal

The week began with losses and recovered as the same progressed. By the close of the week, BSESENSEX had gained 424.11 points or 0.87 per cent to close at 49,206.47 points, while NIFTY gained 192.05 points or 1.31 per cent to close at 14,823.15 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.38 per cent, 1.54 per cent and 1.58 per cent, respectively. BSEMIDCAP was up 1.46 per cent, while BSESMALLCAP was up 2.53 per cent. The top sectoral gainer was BSEMETAL up 10.29 per cent. In the previous week it had gained quite similarly at 10.3 per cent. In individual stocks one saw Tata Steel gain 14.31 per cent, Hindalco gain 10.13 per cent and Vedanta gain 10.04 per cent. Steel Authority of India Limited gained 20.76 per cent.

The Indian Rupee gained 55 paisa or 0.74 per cent to close at Rs 73.51 to the US Dollar. Dow Jones hit yet another lifetime high of 34,811 points and closed marginally lower. Dow Jones gained 902.91 points or 2.67 per cent to close at 34,777.76 points.

Metal stocks have been on a roll and have done exceedingly well. Stocks like Tata Steel and Hindustan Aluminium are not only trading at 52-week highs but lifetime highs. Not sure whether its time to turn cautious or not yet, but certainly to expect some substantial correction since prices have risen by more than 3.5 times in the case of Hindalco and almost 4 times in the case of Tata Steel in the last 12 months.

Yet another interesting case is that of Vedanta Limited which wanted to delist and had offered a floor price of Rs 87.25. The largest insurance company had in the delisting offer proposed to tender its shares at Rs 320. Many wondered who was right at that point of time. The fact of the matter is that LIC as one institution saved the wealth of millions of small shareholders and stonewalled the delisting. In less than 12 months the share has rallied more than 4.5 times to close at Rs 283.20 on Friday. Kudos to LIC for taking their stand which has almost been completely vindicated in about six months. As a piece of news, the share saw selling on two different occasions as the weightage of the stock was readjusted for changes in free float as the promoter holding has increased to 65.2 per cent post the voluntary buyback of shares at Rs 237 in April 2021.

Results from Bandhan Bank were disappointing on two fronts. Firstly, their housing loan book saw huge provisions and their micro-finance book continues to be under pressure. The bank saw its profits for the final quarter drop a massive 80 per cent at Rs 103 cr against Rs 517 cr in the similar quarter a year ago. The bank has almost doubled its provisions to Rs 1,594 cr against 827 cr in the year ago period. This result should be an eye opener to many more in a similar line of activity going forward. With the sharp increase in Covid-19 cases, there is a need to preserve cash amongst the lower levels of the social pyramid and this is even at the cost of lowering of CIBIL scores. Borrowers believe that the pandemic could hit just about everyone and the need would be cash. This is likely to have an impact more on the results which come for Quarter one of FY22 and onwards. This space needs to be watched in the markets carefully.

The Covid-19 front saw the world register 15,83,34,441 patients, 32,97,034 deaths and 13,58,07,718 patients recover. In India we saw 2,22,96,414 patients, 2,42,398 deaths and 1,83,17,404 patients recovering. Compared to the previous week, the world saw 55,06,211 new patients, 90,206 deaths and 56,94,578 patients recovering. In India, we saw 27,38,957 new patients, 26,856 deaths and 23,25,133 patients recovering. Medical aid in the form of oxygen, medicines and vaccines are coming in to India based on the fact that this country had helped many countries during the first year of the pandemic when cases in India were much lower. One hopes and prays that things come under control at the earliest and with the least loss to human life.

The week ahead has a trading holiday on May 13. Markets in India have been choppy and volatile and trading in a broad zone for quite some time. While they did try to break downwards when they briefly traded around 47,250 levels on the BSESENSEX around the thord week of April, they have bounced back smartly from there. The immediate resistance is the previous high made around 50,375 points a week later at the end of April. These levels look as important levels and either of them have to be breached and sustained for any meaningful move thereafter. Similar levels on NIFTY are 14,150 and 15,050 points. The strategy for the four-day week should be to continue to trade and sell on sharp rallies and buy on sharp dips. The importance of sharpness should not be ignored. Midcap and Smallcap stocks would continue to outperform the benchmark indices. Be cautious particularly in the metal pack. Trade cautiously.

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

Source: IANS