It was a tough week and it got elongated by an extra day as budget day on the 1st of February was a Saturday. We saw markets making a bottom on Monday and then rallying for the next four days in a row. Saturday, markets were all over the place, up and then down and finally ended flat with BSESENSEX marginally positive and NIFTY marginally negative. BSESENSEX gained on five of the six trading sessions and lost on one while NIFTYY gained on four and lost on two. BSESENSEX gained 1,315.50 points or 1.73% to close at 77,505.96 points while NIFTY gained 389.95 points or 1.69% to close at 23,482.15 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.76%, 1.47% and 1.28% respectively. BSEMIDCAP gained 0.39% while BSESMALLCAP lost 0.02%. While the loss on small cap is insignificant, it just shows the damage or carnage that took place there. The lows made on Monday were at 75,267.59 points on BSESENSEX and at 22,786.90 points on NIFTY. 

The Indian Rupee lost 41 paisa or 0.48% to close at Rs 86.61 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two. Friday saw a sharp correction. Dow gained 120.41 points or 0.27% to close at 44,544.66 points. President Donald Trump has announced duties of 25% on Canada and Mexico and an additional 10% on all goods from China. While Canada and Mexico have retaliated with similar duties of 25% on the USA, China is yet to respond. India in its budget has made changes to the duties on import of Tesla and Harley Davidson. This would put PM Modi in a stronger position when he visits the USA in February. It would start the meeting with a pleasant gesture from India as the stage would be set to get favors with Trump’s favorite Harley Davidson getting a favorable treatment. On expected lines, the US FED kept interest rates unchanged and it appears that an immediate rate cut looks unlikely in the near term.

The Indian budget was announced on Saturday the 1st of February. The FM Nirmala Sitharaman has now set a new record of being the first FM to declare eight budgets in a row and beating the likes of Pranab Mukherjee and P C Chidambaram. Many announcements were made in the budget which try to revive the economy which seems to be stalling. The biggest change is in the personal income tax rules which would now exempt income of up to Rs 12 lakhs in the hands of the tax payer. The relief on this would entail the center letting go of one lakh crores to tax payers. This is much higher than what people expected. A saving of between Rs 60,000-80,000 per individual would bring about consumption led saving which would have a cascading effect across sectors such as FMCG, real estate, autos, white goods and also consumption sectors like jewellery, travel and tourism and so on. Further focus has been laid on providing a boost to travel and tourism with the ‘UDAAN’ scheme extended for another 10 years. 

Bihar has been given a boost with new airports and a big boost to the health conscious food, ‘MAKHANA’ being highlighted. This crop grown in Bihar is also known as foxnut and has become a upmarket healthy snack in recent times. It comes in various flavors and would be found in all upmarket stores in metros. The budget has announced the setting up of a board to help and assist farmers in the production of this crop and the value add of the same as well. The product retails at around Rs 1,800-2,000 per kg in metros when bought in ready to use packs of 45-100 grams. 

There are announcements regarding insurance for gig workers which would go a long way in improving their lives. FDI in insurance sector has been raised from 74% to 100%. Skilling India would be another thrust area for the government. Customs duties on items used for EV and lithium iron batteries have been reduced to encourage the use of cell production in the country. There has been change in customs duties on many products where the basic duties have been reduced and additional surcharge has been levied. This is neutral to the duty on the product but benefits the center as the revenue from cess, is not shared with states. Major changes have been made in the limits of MSME as well which would give benefits to a very large segment of Indian entrepreneurs across segments. This is the driving force of the country and something that has the potential to turn things around. 

The budget is banking on the boost in the hands of the largest segment of tax payers in the country getting this money and the same giving rise to a cascading increase in consumption, leading to a revival in demand across sectors. Time will tell how much it leads to. Other things were on expected lines and one must remember that everything these days does not go through the budget. 

In primary market news, the issue from Denta Water and Infra Solutions listed on the bourses on Wednesday the 29th of January. The company had issued shares at Rs 294. The share closed day one at Rs 346.45, a gain of Rs 52.45 or 17.84%. Over the remainder of the week, the share lost some ground and closed at Rs 336.60, a gain of Rs 42.60 or 14.49%. 

The issue from Dr Agarwal’s Healthcare Limited in a price band of Rs 382-402 was subscribed on the basis of support from QIB’s. The issue was overall subscribed 1.55 times with QIB portion subscribed 4.64 times. HNI portion was under subscribed 0.4 times, Retail portion undersubscribed 0.41 times. Employee portion was undersubscribed 0.27 times. The share would list on Tuesday the 4th of February, one day earlier because of markets working on Saturday on account of the Union Budget.

January futures expired on Thursday the 30th of January and markets were choppy to say the least. The series ended with bears taking it most comfortably. The series was down 500.70 points or 2.11% to close at 23,249.50 points.

The week ahead also has RBI meeting for the last review meeting for the financial year between the 5th to 7th of February. It is expected that there would be a repo rate cut of 25 basis points in the same to 6.25%. This would inject liquidity in the system and help economy revival.  

Coming to the markets in the week ahead, almost all the events are over except RBI meeting which is three to five days away. The outcome is more or less known that there would be a 25 basis points cut in Repo rate. Concerns for the markets continue to be its rich valuation and the continuous selling by FPIs. Even though Saturday was a holiday there was small selling by them which signifies their intent. Going forward one needs to see what happens when US markets start to correct, now that duties have been announced by both USA and its neighbors Canada and Mexico on each other. Things could turn messy as increase in rates would lead to inflation going forward. 

Key support for the markets are the lows made on Monday at 75,267 points on BSESENSEX and at 22,786.90 points on NIFTY. On the resistance side we have the same at levels of 23,500-23,600 on NIFTY and at 77,800-77,900 points on BSESENSEX. Higher up we have resistance at 23,800 points and at 78,400-78,500 points. The first of the levels were hit on Saturday before markets corrected on Saturday. While the mood of the common man is bullish with the tax breaks, the same is not the case in stock markets. FPI selling, valuations concern, results from corporate India for the October to December 24 quarter not being up to the mark, US bond yields are all matters of concern. Now we could have a new concern adding to the list mentioned. That would be US markets correcting after the tariff war. This could bring about a reaction to our markets on global weakness.  All in all, turbulent times ahead with plenty of volatility. 

The strategy in such times would be to look at large cap stocks alone and refrain from small cap and midcap stocks. These sectors are still richly valued and could experience considerable pain. Further the supply of fresh paper from PE investors, promoters and IPOs seems to be never ending. 

In conclusion, be conservative, allow things to cool off and look for safety rather than adventurism.

It was a volatile week at the markets where investors and traders were caught napping. Once again markets demonstrated that they have a mind of their own. Markets gained on three of the five trading sessions and lost on two. BSESENSEX lost 428.87 points or 0.56% to close at 76,190.46 points while NIFTY lost 111.00 points or 0.48% to close at 23,092.20 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.01%, 1.29% and 1.64% respectively. BSEMIDCAP was down 2.39% while BSESMALLCAP was down 4.21%. The benchmark indices made new lows with BSESENSEX at 75,641.87 points and NIFTY at 22,976.85 points. With each successive new low, markets are becoming that much more vulnerable and unless they bounce we could see a sharp sell-off sooner or later. 

The Indian Rupee recovered, gaining 41 paisa or 0.47% to close at Rs 86.20 to the US Dollar. Dow Jones gained on three of the four trading sessions and lost on just one. Dow was up 936.42 points or 2.15% to close at 44,424.25 points. 

There was one IPO which listed on the main board on Thursday the 23rd of January. The issue from Stallion India Fluorochemicals Limited had issued shares at Rs 90. The share debuted at Rs 120 and closed day one at Rs 125.99. On Friday, the share was under pressure and lost ground, closing at Rs 119.70, a gain of Rs 29.70 or 33%. 

There is one issue opening in the week ahead. The issue from Dr Agarwal’s Healthcare Limited is opening on Wednesday the 29th of January and closing on Friday the 31st of January. The issue consists of a fresh issue of Rs 300 crores and an offer for sale of 6,78,42,284 shares in a price band of Rs 382-402. The issue would raise a total sum of Rs 3,027.26 crores at the top end of the price band. 

The company as the name suggests is a super specialty in eye care and offers state of the art facilities in India and Africa. It has 28 hubs and 265 spokes with a revenue break up of 45.42% and 54.35% between hub and spoke. The hospital chain has 193 facilities in India of which 120 are in the states of Tamil Nade, Maharashtra and Karnataka. The company has 15 facilities in Africa. Of the total facilities, more than half are emerging at 113 while 95 are mature. They are defined as less than three years as emerging and mature as more than three years. 

In terms of performance, the company reported revenues of Rs 1,332.15 crores for the year ended March 24. The restated profit after tax was Rs 95.05 crores. The EPS on a fully diluted basis was Rs 3.13. The PE band is a steep 122.04-128.43 times. Expensive by all standards, but the selling point is the mix of emerging and mature outlets/facilities that the company has. Secondly eye care is something that is imminent with age. The target opportunity is the population. In terms of comparison while there are no listed peers, all the hospital chains are comparable. The biggest difference is the fact that hospitals have beds while eye care is all OPD (out patient department). This reduces capex cost and leads to a significant higher patient throughput. Equipment is the biggest asset in this business.  

Primary markets have been buoyant only because secondary markets have been weak over the last couple of months. This is borne out by the fact that a large number of IPOs listed over the last couple of months are trading at their lows and many of them below their issue price as well. Euphoria and hence over subscription sell the issue and as and when reality sinks in the cookie crumbles. One example of high volatility is in Waaree Energies which had issued shares at Rs 1,503. It touched a high of Rs 3,740 and on Friday made a low of Rs 2,207 before closing at Rs 2,240. 

Markets are seeing continuous selling by FPIs and in the month of January they have sold on every single day but one. Domestic institutions and our very own individual investors have been buying and absorbing the sales being made. The fact remains that markets are falling and there is no respite visible on the horizon. In the US, Trump has begun making announcements but has not yet come to the trade issues as yet. What he would do, is anybody’s guess. 

Closer home, the Union Budget would be presented on Saturday the 1st of February which is a mere five trading sessions away. Not too many clues what the budget would hold as yet. However, the buzz all over is that there could be some changes in personal income tax which would ensure that there is more disposable income in the hands of the people who form the bulk of the tax paying population of this country. If this happens this could lead to consumption led demand going up and that would help in the economy which seems to be stalling. Any other goodies if announced could be treated as bonuses. 

January futures would expire on Thursday the 30th of January. The current level of NIFTY at 23,092 points is lower by 658 points or 2.77%. the present mood makes it easy for the bears to take this series. The good part would be that positions would get significantly reduced before virtually budget eve. This would bring sharp volatility if there is any unexpected announcements in the budget. 

Key levels for the markets on the downside are at the lows made on Tuesday in the week gone by at 75,640 and 22,976 points on BSESENSEX and NIFTY respectively. If these break, we would have a sharp downtick which could take us down another 500-600 points on BSESENSEX and 200 points on NIFTY. On the upside resistance is around the 23,450-500 points on NIFTY and at 76,700-850 points. The strategy for the week would be to look for opportunities in the large cap space. Pain in midcap and small cap is still happening and there could be acceleration as we come to the last of the pain points which could get extended. 

Trade cautiously.