Markets began the week on a strong note and gained over 350 points on Monday. The rally was helped in no small manner by short covering as in the sentiment had turned bearish over the last few trading sessions. Tuesday saw the new RBI Governor chairing the first MPC (monetary policy committee) and the decision to cut repo rates was unanimous. Markets corrected thereafter and the BSESENSEX ended with gains of 195.18 points or 0.70% to close at 28,061.14 points. NIFTY gained 86.45 points or 1% to close at 8,697.60 points.
Markets are moving in both directions but seem to have lost the momentum. The rally has been long and strong and is now over seven months old ever since the day the budgets were presented on the 28th of February. The focus has shifted to midcap and smallcap and they gained 2.86% and 3.46% respectively. While BSEMIDCAP is trading at an all-time high, the BSESMALLCAP is trading at a multiyear high. This is a dangerous situation and one needs to watch this carefully as in every reversal this space gets knocked out of shape and there are large casualties.
In primary market news, shares of HPL Electric & Power Limited listed during the week and had a poor start. Share prices closed at Rs 177.90, a weekly loss of Rs 24.10 or 11.93%. The issue from Endurance Technologies Limited saw good response and was subscribed 43.84 times. The QIB portion was subscribed 53.43 times, HNI 127.07 times and Retail 2.69 times. Retail subscription was muted on account of some of the poor listings in recent times which has caused the retail investor holding on to stock. This blocking of funds is responsible for the muted response and merchant bankers and promoters would be well advised to ensure that something is left on the table for investors.
Some banks have effected rate cuts of 10 basis points post the 25 basis points cut done by RBI to be seen as being on the right side of the new Governor. Symbolic cut by member banks without prodding by RBI is a welcome sign but nothing more than that as far as business is concerned.
The week ahead is a truncated one as we have two consecutive trading holidays on account of religious events on Tuesday and Wednesday. Volumes would be muted ahead of these holidays as global markets would be open. Further when trading resumes there would be just two trading days for the week to end. Result season for the quarterly results of the period July to September would kick in as well and not much is expected on the positive side. When one looks at valuations clearly there is no scope for appreciation and there is just one way for the markets to go. Correction, consolidation and allowing valuations to return to sanity. The biggest casualty would be midcap and smallcap space.
I would therefore advice investors to take money of the table and wait for corrections.