The week gone by had ‘Holi’ celebrations but on different days in Maharashtra and the rest of the country. While Mumbai, Maharashtra and the stock markets celebrated on Tuesday, the rest of India did so on Wednesday. Markets gained at the open of the week and then lost, with two days of gains and two days of losses. The falls were much bigger, hence the week ended with losses. BSESENSEX lost 673.84 points or 1.13% to close at 59,135.13 points while NIFTY lost 181.45 points or 1.03% to close at 17,412.90 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.92%, 0.69% and 0.61% respectively. BSEMIDCAP and BSESMALLCAP were against the trend and gained 0.09% and 0.38% respectively. 

The Indian Rupee lost 8 paisa or 0.10% to close at Rs 82.04 to the US Dollar. Dow Jones after having gained for four consecutive sessions, lost for four consecutive sessions. The first day of the week saw gains and then it lost on the remaining four days. Dow Jones was down 1,481.33 points or 4.44% to close at 31,909.64 points. 

There were two events that hit trading sentiment in the US this week. The first was the statement from Jerome Powell about interest rates. FED Chairman Jerome Powell on Tuesday cautioned that interest rates are likely to head higher than central bank policymakers had expected. The FED interest band is currently 4.50%-4.75% and it is expected that there would be one rate hike of 50 basis points and at least two more of 25 basis points before a pause. With this comment there may be two or three rate hikes of 50 basis points taking the rate to around 5.75%-6%. 

The second event was the Federal Deposit Insurance Corporation putting under receivership, Silicon Valley Bank. The bank funds startups and sold a 21 billion bond portfolio to repay depositors. The portfolio consisted of mostly US Treasuries and the average yield was 1.79%, far below the current 10-year treasury yield of 3.9%. This resulted in a loss of 1.8 billion dollars which the bank proposed to raise through fresh equity issues. The share price fell by 60% and was hence called off. This as per media reports is the first of many US banks feeling the heat of rising interest rates. 

A thought which comes to mind is that this is the fall-out with just one bank. If a couple more were to go belly up it could shake the entire system.

The financial year 2022-2023 is coming to an end and there are expectations that mutual funds may invest in shoring up their NAVs in the coming days. This used to be the practice in earlier years, but nowadays the system is that of a daily NAV and a weighted average NAV. It therefore does not make much sense in trying to shore up. However, the Midcap and Smallcap segments did show remarkable poise and strength in the week gone by. Whenever markets have begun to fall sharply and attempt to make a medium term bottom, the selling happens across the board. There has so far not been a single occasion when such a large segment like the midcap and Smallcap segment has remained unaffected. Can this time be different and are we ready to rewrite the history books, only time will tell. 

Markets are jittery and the mood is down in the dumps across geographies whether it be the US or India. It seems that the turnaround right away is virtually impossible. The best healer is time and we need to spend time building from a new base which has to be lower than present levels. While with markets drifting over the last three months since the 1st December 2022 new highs, we have moved down but not lost significantly. Valuations have become lower than the previous rich earlier but not enough for warranting a buy. For a near short term bottom also, there has to be shakeout and a sharp fall of some kind. Could this be the period?

Coming to the markets in the week ahead, expect volatility and a nervous marketplace. While one eye would be on the US markets and what happens there, the other ear would be trying to sift the noise about the banking system and whether any more events like the Silicon Valley are happening. As mentioned earlier, the key focus in India would be on the Smallcap and midcap sector which could be under pressure hereon. 

Key resistance for the markets would be at levels of 17,750-17850 on NIFTY and 60,250-60,550 on BSESENSEX. Incidentally even during the rally during the earlier half of the week, these levels were not breached. The higher resistance would remain in the region of 18,265 on NIFTY and 61,400 on BSESENSEX. On the support side, immediate support is the budget day low made on 1st February of 58,816.64 points on BSESENSEX and 17,353.40 points on NIFTY. If these are broken then the next line of defence would be 17,000-17,050 on NIFTY and 57,900-58,050 on BSESENSEX. Gut feel says that this week we are likely to see the budget day low being broken on the downside. If that were to happen there could be some sort of a sharp sell-off. 

The strategy for the week would be to sell on any rallies and buy only large caps on any major fall. Avoid dabbling in midcap and Smallcap on any falls or weakness. The pain point would be in this sector. Trade cautiously and avoid adventurism in the markets. 

The week by and saw markets lose on the first two days and then it witnessed extreme volatility with markets gaining 0.8%, losing almost all of it on Thursday and then gaining a massive 1.5% on Friday. The week which saw markets gain on three of the five trading sessions ended with gains across the broad market. BSESENSEX gained 345.04 points or 0.58% to close at 59,808.97 points while NIFTY gained 128.55 points or 0.74% to close at 17,594.35 points. The broader markets saw BSE100, BSE200 and BSE 500 gain 0.80%, 0.98% and 0.98% respectively. BSEMIDCAP was the outperformer gaining 1.73% while BSESMALLCAP gained 0.95%. 

The Indian Rupee gained 79 paisa or 0.95% to close at Rs 81.96 to the US Dollar. Dow Jones lost on just one of the five trading sessions and gained on four sessions. Three of these sessions were continuous as the week closed on a positive note. Dow Jones gained 574.05 points or 1.75% to close at 33,390.97 points. 

Our markets fell on Thursday because the bond yields were rising in the US and touched the 4% level in February. Friday saw a huge rally on the back of positive news flow on the Adani group where a fund manager based out of the US, GOG Partners Emerging Markets Equity Fund invested Rs 15,500 crs approx. in four of Adani’s companies. These shares were bought from the Adani family. At close on Friday, gains in two days since buying the shares on Thursday were about 33.45% in the case of one company and about 11.1%-11.32% in the case of the other three. 

On the same day, the Supreme Court appointed a six-member panel to look into the allegations against the group and submit a report in a sealed cover within two months. This would clear doubts raised by Hindenburg, the continuous disruption in Parliament would now stop and alleged cronyism, a charge raised by the opposition would also be resolved. 

Very clearly this puts the Adani issue on the back-burner as far as the markets are concerned and they would move on. As this was an issue which haunted the markets for five weeks, the temporary resolution and moving on turned the sentiment on the street from despair to optimism, which was also reflected in markets moving up. 

SEBI has issued orders in the AXIS Mutual Fund front running case against as many as 21 entities who have been barred from accessing Capital markets. Wrongful gains of Rs 30.5 crs was made by these entities. They have to disgorge these gains and then also pay fines. They have been asked to provide full inventory of their assets. Hopefully now, details of the owner of the elusive Lamborghini which was used by the Axis dealer would become clear and solve the mystery of the car owner.

Money being spent on buying fancy apartments and cars by key personnel of new age companies continues. The latest to join this list is Deepinder Goyal of Zomato who bought a Ferrari even though losses of Zomato have widened post the Q3 results. Wonder what message they are trying to send?

The week ahead has a trading holiday on account of Holi. It appears as of now the holiday would be on Tuesday the 7th of March in Maharashtra and the markets, and on Wednesday the 8th of March in the rest of the country. This would break the momentum in the markets as volumes would dry up.  Coming to the markets in the week ahead, expect high volatility to dominate the markets. The last three days’ move in Indian markets clearly shows how clarity of trend eludes the market. They are looking for clues to determine the trend. 

The first point of resistance on the indices would be at levels of 17,750-17850 on NIFTY and 60,250-60,550 on BSESENSEX. This is not to suggest that markets have to necessarily reach these levels. The guidance is on account of the change in mood and upbeat sentiment post some clarity on the Adani group last week. The higher resistance would remain in the region of 18,265 on NIFTY and 61,400 on BSESENSEX. This currently looks like Mount Everest for our markets. On the lower side strong support exists at the budget day low made on 1st February of 58,816.64 points on BSESENSEX and 17,353.40 points on NIFTY. If these are broken then the next line of defence would be 17,000-17,050 on NIFTY and 57,900-58,050 on BSESENSEX.

The strategy for the week would be to allow markets to find their equilibrium during Monday’s trading and then take a call which way markets would go when they resume trading on Wednesday. Expect a super volatile week ahead.