Volatile expiry and choppy markets ahead

By Arun Kejriwal

Markets had a decent week last time around, but Fridays movement opens up many more possibilities going forward. BSESENSEX gained 1,808.25 points or 3.71 per cent to close at 50,540.80 points while NIFTY gained 497.50 points or 3.39 per cent to close at 15,175.30 points. The broader indices saw BSE100, BSE200 and BSE500 gain 3.34 per cent, 3.50 per cent and 3.55 per cent, respectively. BSEMIDCAP gained 4.77 per cent while BSE SMALLCAP gained 4.19 per cent. The top sectoral gainer was BSEBANKEX which gained 7.34 per cent. In Individual stocks the top gainer was Indusind Bank up 14.03 per cent followed by State Bank of India which gained 11.26 per cent. Incidentally, the SBI declared its annual results on Friday and 40 per cent of the weekly gains came post the results on Friday. It appears there is more steam left in the SBI counter in the coming week.

 

The Indian Rupee gained 45 paisa or 0.61 per cent to close at Rs 72.83 to the US dollar. Dow Jones was under pressure during the week and lost 174.29 points or 0.51 per cent to close at 34,207.84 points. Dow lost for the first three days of the week and gained on the remaining two days.

Go Airlines (India) Limited has filed its draft red herring prospectus through which it plans to raise Rs 3,600 cr as a fresh issue. The document throws up very interesting facts about the brand and the ownership of the same. The popularly known brand "Go Air" is owned by a company which has one of the promoters own 99.99 per cent of the share capital of that company. The company filing for DRHP has chosen to change the name to "GO FIRST" for the airline after being in existence for about 16 years. Readers would recall that when Jet Airways had tapped the capital markets way back in 2005, there were major valuation issues with the brand as it was owned by the promoter in his individual capacity and a separate valuation was being asked for.

Here we have a company going public in the most horrendous time possible with Covid-19 having affected airlines around the world, having a full-on dispute between the promoter and the company about the brand. Surprises one has to how such an issue could meet with market expectations, raise money, and possibly see the light of day in reasonable time. More on this issue as time progresses.

The number of patients affected by covid-19 globally saw 16,70,58,099 patients, 34,68,924 deaths and 14,79,95,700 people recovering. In India we saw 2,65,30,132 patients, 2,99,296 deaths and 2,34,25,467 people recovering. Compared to the previous week, the world saw 38,69,863 new patients, 85,073 deaths and 64,88,579 patients recovering. In India we saw 18,46,055 new patients, 28,977 deaths and 26,30,132 patients recovering. It is indeed heartening to note that the number of new patients has dropped significantly while the recovery rate in terms of patients recovering is around the same. This has brought down the number of active cases significantly. Very clearly the 2nd wave seems to have peaked in India and is now coming under control.

The Reserve Bank of India has transferred Rs 99,122 cr to the government as surplus for the nine months ended March 2021.

During the course of last week's trading, we saw an important resistance level being crossed after a very long time. This puts the market in a different orbit, confirmation of which would be available over trading of the next week. On Friday, the markets gained slightly over half the week's net change. BSESENSEX gained 976 points of the weekly 1,808 points while NIFTY gained 266 points of the 497 weekly points gained. Whether this was purely short covering or interested buying coupled with short covering would be visible over the next couple of days trading. Institutional buying by FPI was Rs 510 crs while by domestic institutions it was Rs 649 crs on Friday.

The immediate targets for the BSESENSEX are 51,821 points followed by the all-time high of 52,767 points made on February 16. In terms of points the two levels are a mere 1,300 points and 2,200 points away. Similar levels on the NIFTY are 15,336 points and 15,431 points which are 160 points and 255 points away.

The week ahead has Nifty futures for May series expiring on Thursday (May 27). The current series is higher by 280.40 points or 1.88 per cent. Readers would recall that before the start of the previous week, the series was in the red and bulls have an upper hand for the first time during this series. This incidentally is the highest level of NIFTY since the middle of March.

The week ahead is very heavily skewed towards sharp volatility and the first couple of days movement would determine the immediate future of the markets. Continued follow up is a must for the present rally to continue which has already gained significant ground. In case that does not happen, we could see correction and make the expiry a messy affair. One thing however is clear that sooner than later, markets are poised to hit a new life-time high and this could happen as early as in the June series.

Buy on dips and sell on sharp rallies would be the strategy to continue in the market for the coming week. Opportunities on both sides would be available.

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

Source: IANS