Tough volatile week with downward bias

Markets behaved exactly as expected in the week gone by and opened with an upward gap on Monday. Markets moved with sharp volatility thereafter but failed to make further gains at the end of the week. Friday closing was lower than the closing of Monday, indicating that it ran into resistance even faster than expected.

BSESENSEX gained 884.57 points or 1.61 per cent to close at 55,769.23 points. NIFTY gained 231.85 points or 1.42 per cent to close at 16,584.30 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.19 per cent, 1.20 per cent and 1.37 per cent respectively. BSEMIDCAP gained 1.14 per cent while BSESMALLCAP gained 2.98 per cent. Markets gained on two of the five trading days while they lost on three days. Gains were recorded on Monday and Thursday.

The Indian Rupee lost 6 paisa or 0.08 per cent to close at Rs 77.62 to the US Dollar. Dow Jones lost 313.26 points or 0.94 per cent to close at 32,899.70 points. Readers would recall that Monday was a trading holiday in the US. Markets gained on just Thursday and lost on the remaining three trading days.

Analysing the trading week in India brings some interesting facts. Reliance Industries had a spectacular week and even though it was not the top gainer with Coal India being the top gainer, it contributed the maximum to the BSESENSEX. Reliance gained Rs 205 or 7.96 per cent to close at Rs 2,780. It contributed about 625 points of the 885 that the BSESENSEX gained during the week which is roughly 70 per cent of the gains. Secondly, the high of the week was 56,432 on BSESENSEX and 16,793 on NIFTY, but the close was below the levels we hit on Monday close.

Incidentally the beginning of the second set of numbers mentioned last week were within touching distance only. Levels mentioned were 56,500-56,800 points on BSESENSEX and 16,850-16925 levels on NSENIFTY. We hit levels of 56,432 on BSESENSEX and 16,793 on NIFTY. This was close at the lower end but nowhere in the range and just not enough. The failure of crossing these levels would be felt this week.

There were three listings last week. The first of the lot on Monday was international watch retailer Ethos Limited which listed on Monday. The company had issued shares at Rs 878. Shares closed day one at Rs 802.60, a loss of Rs 75.40 or 8.58 per cent. By Friday they lost further ground to close at Rs 748.15, a loss of Rs 129.85 or 14.79 per cent.

The second issue to list was eMudhra Limited which listed on Wednesday. The company had issued shares at Rs 256. Shares closed on listing day at Rs 258.85, a gain of Rs 2.85 or 1.11 per cent. By Friday, they lost some ground and remained just afloat at Rs 256.15, up Rs 0.15 or 0.06 per cent.

The third share to list was speciality chemicals company Aether Industries Limited which had issued shares at Rs 642. Shares were listed on Friday and they had a flying start gaining Rs 134.75 or 20.99 per cent on day one. Shares were locked at the upper circuit of 10 per cent at end of trading on Friday.

There are no further primary market offerings in the coming week.

The issue of applications bid on the exchange and subsequently being not banked was taken up by the regulator SEBI and corrective measures announced. Effective 1st September it has been specified by the regulator that applications which have been bid will have to be banked and the option whereby investors can conveniently get away will be blocked. Readers will be aware that when one bids online or through an app or goes to a bank and bids, the money against the application is first blocked and only then the application is bid. It is only in the case of the syndicate member where the bidding happens first and then the blocking. One will have to wait to understand the mechanism where this anomaly is removed. This move will however bring sanity to the IPO bidding system.

The week ahead sees RBI meet for its policy review. The MPC as it is known would be meeting between the 6th-8th of June and announcing its policy midway on 8th of June. It is widely believed that there would be another round of rate hikes this time considering the rise in inflation. Probably after this round, rate hikes may stop for some time as a normal monsoon would help in softening of prices going forward. The US FED would also be meeting in the middle of June for a similar rate hike.

Coming to the markets, we have a tough and volatile week ahead of us. While last week saw gains being made in the market, things could be the reverse this time around with markets losing ground. Previous week's highs would be resistances and we would be back at supports which are at quite lower levels. As far as immediate support is concerned, lows of the fortnight ago at 53,400 and 15,900 levels will act as strong support. Immediate resistances would be at the highs of the week at 56,432 and 16,793. If levels of 54,500 and 16,400 are broken we could see the downward move picking momentum.

The strategy would be to sell on any rally and look for buys only on really sharp falls. With the results season completed there are no immediate triggers. The war between Russia and Ukraine is over 100 days old and has become a never ending one. With the US looking under pressure and Indian markets not too positive either, tough times are ahead.