Markets to remain rangebound with positive bias

The first week of the new calendar year 2022, saw markets in India open with a bang. FII's who were big sellers in the last couple of months, stopped selling and actually made net purchases. This changed the sentiment and at the end of the third day of the week, things looked hunky dory.

Thursday saw a correction and even though Friday saw markets gain, it was small compared to what we saw in the earlier part of the week. At close, BSESENSEX had gained 1,490.83 points or 2.56 per cent to close at 59,744.65 points while NIFTY gained 2.64 per cent or 458.65 points to close at 17,812.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.65 per cent, 2.45 per cent and 2.37 per cent respectively. BSEMIDCAP gained 2.01 per cent while BSESMALLCAP was up 1.95 per cent.

The Indian Rupee gained three paisa or 0.04 per cent to close at Rs 74.30 to the US Dollar. Dow Jones hit a new lifetime high of 36,953 points and a new closing high of 36,799.65 points during the week. It, however, closed with a small loss of 106.64 points or 0.29 per cent for the week at 36,231.66 points. The fall came post the minutes of the recent US Fed meeting being made public, where it appears imminent that a rate hike is round the corner. This caused markets to correct and NASDAQ saw an even deeper correction. The much debated and controversial crypto currencies took yet another beating across the board.

In political news in India, the Election commission has announced a one day poll in four states of Uttarakhand, Goa, Manipur and Punjab. There would be a seven-phase poll in Uttar Pradesh. The elections would begin from the 10th of February and counting would take place on 10th of March.

Results season for the third quarter, October to December 2021 will kick in with full earnest in the coming week. January 12th will see three IT companies declaring their results. They are TCS, Wipro and Infosys with TCS also announcing terms of its fourth buyback along with its quarterly results. While the results season keeps the markets busy and volatile, it also ensures that sector rotation keeps on constantly happening.

In primary markets news, no new primary issues have been announced for the calendar year so far. While there are many waiting on the side-lines, any announcements are still awaited. The mega issue from LIC is likely to see the company file its DRHP in the coming week. The issue would see the first ever reservation for policyholders and would in all probability entail a small discount as is known for retail investors and the new policy holders category. The market would be following this issue closely as reports value the company around the 10 lakh crore market capitalisation level.

In terms of newly listed shares since 18th November, 6 out of the 17 listings are trading at a discount as of Friday.

The rapid rise in Covid-19 affected people has taken its toll on the stock markets. While the number of affected people has risen rapidly, it has not led to people being hospitalised or resulting in deaths. Not being a medical expert, it would suffice to say that in all probability this is a milder variant but more of a spreader, affecting significantly larger populations. The number of affected people has increased globally and we saw more than 2 million cases in the last couple of days. Further, the number of active cases globally has risen very rapidly and is currently at 41.57 million cases with 17.87 million cases in the US alone. In India this number is at a mere 0.59 million cases.

Coming to the markets in the week ahead, it would be a week of consolidation with a positive bias. BSESENSEX would trade in a range of 700 points plus/minus from the present levels of 59,744 points while NIFTY would trade in a range of 250 points plus/minus from the present range of 17,812 points. The present strategy of buying on dips and selling on rallies should continue. With the market breadth increasing substantially, it may make sense to include some midcap and Smallcap stocks where they are expected to perform well in the coming quarterly results. Refrain from getting carried away by the momentum stocks.