The week began on a quiet note and all action was left for the RBI governor to bring about post his bi-monthly review meeting. He led from the front and has given the markets, ahead of the economy enough fuel to fire on all cylinders. This saw the market post fresh gains for the week and give the markets the desired thrust to break out of previous resistances in the coming week. BSESENSEX gained 737.98 points or 0.91% to close at 82,188.99 points while NIFTY gained 252.32 points or 1.02% to close at 25,003.05 points. Bank NIFTY gained 828.70 points or 1.49% to close at 56,578.4 points, which incidentally is a new lifetime high for the index. The broader markets saw BSE100, BSE200 and BSE500 gain 1.15%, 1.30% and 1.46% respectively. BSEMIDCAP gained 2.07% while BSESMALLCAP was up 1.96%. Markets gained on three of the five trading sessions and lost on two. What is interesting to note that at the end of four sessions, markets were flat for the week and all momentum has come post RBI announcement. Another way of looking at it is that the gains mentioned above are for the day and the week.
The Indian rupee lost 7 paisa or 0.08% to close at 85.64 to the US Dollar. Dow Jones gained on three of the five sessions and was up 492.80 points or 1.17% to close at 42,762.87 points. Here again, markets were flat after four sessions and all gains have come on Friday. Interestingly the spat between Trump and Eoin Musk has gone viral and has caused many a heart to beat at double the rate.
In primary markets we had four listings last week which included Aegis Vopack, Schloss Bangalore, Prostarm Info Systems and Scoda Tubes. None of the four performed spectacularly and could be termed as a bit of a disappointment. At the end of the week, three of them are trading in a range of plus 7.3% to 9.5% while one is trading at negative 0.60%. Clearly wakeup call for merchant bankers that fund raising cannot be only for the benefit of promoter. There must be something on the table for people who invest in the company as well.
RBI has given a bountiful to the economy and the markets. It announced a third consecutive repo rate cut and this time raised it to 50 basis points. While I had spoken about the same in the newsletter last week, the same should not be taken as a great insight as I did not anticipate a 100 basis points cut in CRR to 3%. This would be done in four tranches of 25 basis points each starting from 6th of September to 29th of November.
The markets have their best ever chance to break out of the shackles and cross the resistance that it is encountering at 25,150 levels. Bank NIFTY is at a new lifetime high and with a weightage of 42%, it gives it the momentum to lead NIFTY to cross the resistance. If it does so, there would be an upward target of 25,450-550 points which would open up and give room on the upside. On the downside we have support at 24,800-24,850 and further lower at 24,100 points around.
The strategy would be to ride the momentum and initiate fresh longs once market crosses 25,150 and sustains. One should not get surprised if that happens in the first part of Monday’s trading but one should observe whether the momentum is maintained or encounters selling. Post these events the next event would be the Quarter one results and probably before that the US-India trade agreement. Both of these events would be closely watched. Once 25,150 is crossed and sustained the support level would shift upwards to 25100-25,150 and that should be closely followed and respected.
With an early monsoon breaking out, a good forecast for the coming monsoon, favorable credit policy with clear focus on inducing a push to lending and inducing consumption, well controlled inflation, global support against our neighbor post the outreach, one believes that this is the time for us to give our markets the support it needs.
Happy hunting, but do not get carried away.
