Global cues and US Fed upcoming meeting hold key for market revival

The week gone by had plenty of action and it was from the battleground of Ukraine and the election results of five states in India. As expected, markets tend to react to each of such news in the manner they feel apt.

Markets fell sharply on Monday losing 1,500 points on BSESENSEX and almost 385 on NIFTY. They recovered more than their losses on Tuesday and Wednesday and gained 1,800 points and 480 points respectively. Thursday saw markets open at the high of the day and then lose between 35-40 per cent of the gains still closing with handsome gains for the day. Friday was a day for resting and recuperation with markets gaining 0.2 per cent for the day.

With gains on four of the five trading sessions, BSESENSEX gained 1,216.52 points or 2.24 per cent to close at 55,550.33 points while NIFTY gained 385.10 points or 2.37 per cent to close at 16,630.45 points. The broader market saw BSE100, BSE200 and BSE500 gain 2.29 per cent, 2.39 per cent and 2.43 per cent respectively. BSEMIDCAP was up 3.06 per cent while BSESMALLCAP gained 3.25 per cent. The top sectoral gainer was Healthcare with Cipla gaining 12.02 per cent while the Banking sector though closed with minor gainers was under pressure.

The Indian Rupee was under pressure and lost 43 paisa or 0.56 per cent to close at Rs 76.59 to the US Dollar. Dow Jones lost 670.61 points or 1.99 per cent to close at 32,944.19 points. Dow Jones lost on four of the five trading days. The US Fed is meeting on the 15th and 16th of March and is expected to increase interest rates. Inflation in the US has touched a 40plus year high and has become a major cause of concern. How much is the rate hike and the stance on announcing the same would be a key for markets not only in the US but globally.

Election results to the five states saw the ruling party BJP win in four states of Uttar Pradesh, Uttarakhand, Goa and Manipur. The fifth state of Punjab, saw Congress the ruling party being badly beaten by AAP who won a 3/4th majority. The gains on account of the election results were distributed on Tuesday and Thursday as first exit poll and then results flowed.

On the Ukraine front, war has now entered the 18th day and it is unlikely to end in a jiffy with Russia having begun the attack and encirclement of the capital, Kyiv. While we also hear that Ukraine President Zelensky is likely to have conversation and negotiation with Russian President Putin, one can never be sure of such meetings or the outcome. To add to the current mess there is confusion on the biological labs supposed to be present in Ukraine. Very clearly, the Ukraine issue seems to have stretched beyond expected timelines and settlement may also take that much longer.

The IPO or primary market front seems to be getting hotter with just a fortnight left for the financial year 2021-22 to end. Ruchi Soya, has informed the exchanges that they have filed their RHP with ROC and that the FPO for Rs 4,300 crore would open on Thursday the 24th of March and close on Monday the 28th of March. The closing price of Ruchi Soya was Rs 803.70 on BSE on Friday, 11th March. As this is an FPO of a fairly large size, one may expect the price band to be closer to a discount of about 10 per cent to the current close. One must also keep in mind that the current price band has to have a difference of 5 per cent between the higher and lower price which is about Rs 35-40 in this case.

Besides the above issue, one is hearing some other names of issues which may hit the market as well but they are more of a speculative nature and none have made such final announcements as yet.

LIC is yet to take a call on its IPO timing. It however has announced results for the quarter, October to December21, which saw its net profit rise very sharply from Rs 90 lacs to Rs 234.90 crore.

Coming to the markets in the week ahead which has a holiday on Friday the 18th of March for Holi, would see markets continuing to remain choppy and volatile. During the course of trading last week, markets have made lower bottoms and that makes the upside limited while keeping the possibility of falling further open.

With global cues from the Ukraine front and market news from the US, quite volatile, it's not the best time to be in the markets currently. It may also be borne in mind that with just a fortnight to go for the year to end, markets during the year have retained gains of just about half of what they had gained at their peak. The high point was about 26 per cent on the benchmark indices which is down to about 12 per cent currently. It is interesting to note that of these 12 per cent annual gains, almost half have come in the last four days of the previous week. The idea is to show where markets are currently and in the next two weeks, global uncertainty may cause markets to swing wildly.

The strategy for the coming four days should be to sell on any rallies that happen and wait for clarity from the US Fed on their meeting slated for Tuesday-Wednesday. This outcome would give us one day to respond, as Friday is a holiday in our markets. In any case, even traders should restrict themselves to large cap stocks as safety lies in them only. The healthcare sector looks a better one as it has been under pressure and in current times may outperform with NAV of mutual funds coming up in about 10 days from now. Trade cautiously.