It was a tough week for the markets and contrary to expectations, they lost ground last week. It was a short trading session of a mere three days and markets lost on all the three sessions. BSESENSEX lost 1,108.25 points or 1.86% to close at 58,338.93 points. NIFTY lost 308.70 points or 1.74% to close at 17,475.65 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.34%, 1.35% and 1.31% respectively. BSEMIDCAP was down 1.26% while BSESMALLCAP was down 0.82%. Only on Wednesday were markets able to open with gains before turning negative and losing once again.

The Indian Rupee lost 28 paisa or 0.37% to close at Rs 75.90 to the US Dollar. Dow Jones was flattish and on a weak note. It lost 264.89 points or 0.78% to close at 34,451.23 points.

The Indian markets are now showing signs of becoming nervous. We are quite close to levels from which if the markets fell even 1% further, they could be termed as being under severe pressure. In the past they have bounced from such conditions after falling for a day or two, and the recovery has been swift. Which way they behave this time is however uncertain and would be watched carefully by market participants.

The Russia-Ukraine crisis has become never ending. We are almost 50 days old and each passing day is adding to the crisis, not bringing us closer to a solution. The implications of this crisis will have far reaching and telling impact on the world, not just Russia and Ukraine. While crude is something which everyone is aware of, the greater impact would be on food and industrial products and raw materials. Ukraine is a rich country in terms of raw materials whether it is minerals, wheat and corn or sunflower oil.

To add to this major uncertainty, the impact of covid-19 and the sharp rise in cases in China is another crisis in the making. What shape or proportion this could take is uncertain as information from China is just not up to the mark? For the records it must be mentioned that we have seen a rise in cases in India as well and this should be a warning for all concerned. People have stopped wearing masks and seem to have become quite casual in their approach to covid-19 which could become worrisome. While currently there is no alarm, it sure needs to be monitored and taken seriously.

Results season for the quarter ended March 2022 and the year ended March 2022 are going on. There is stress in many results as is being witnessed on the input and raw material front. While sales have shown growth as prices of most products have gone up, the full impact of raw material and other cost increases has not been passed through. This is affecting the performance of companies as well. The next quarter is likely to see improved results as costs in the current quarter (April-June) are seeing some softening and cooling.

LIC is gearing up for its divestment as per media information. They are preparing to launch their issue in the first fortnight of May as per media reports. This may happen even earlier as per latest reports and be launched in the week beginning 25th April. The embedded value as per September 2021 is Rs 5.4 lacs. Earlier, the valuation was expected to be around 2.5 times the embedded value and the issue was for 5% of the company. Now the talk is of the valuation being drastically reduced to around half at 1.25 times the embedded value and the issue size at 7.5% of the capital. The government is working towards getting large participation from pension and sovereign funds. They have given a big sweetener in the form of a commitment that there would be no dilution of stake withing 2 years of the issue being launched.

Assuming this issue is launched, it would be a must hold in portfolio opportunity for investors. This issue could act as a revival issue for the primary markets which is currently struggling and trying to find its feet post the introduction of new norms of subscription, leverage and anchor holding period. There is a large pipeline of companies which are waiting to launch their issues as well. With LIC done and out of the way and if it happens, it would open the flood gates for others to follow.

Markets are precariously poised and need some triggers to improve from hereon. The trigger could be in the form of FII’s stopping to sell and remaining neutral as well. The formal launch of LIC IPO could also act as a trigger, as the issue would only be launched if the government and merchant bankers are comfortable with the issue going through. One must remember that in the LIC issue, the largest fund in the country, LIC would not or could not be the knight in shining armour to save the issue.

In the coming week, expect market to trade with volatility. They would look for some positive cues to gain ground. If that does not happen, and selling or negative news flow continues, pressure on markets would make them vulnerable. With little or no leeway available, one sharp fall could bring about a series of losing days in the market. In such a scenario, trade light and use rallies to sell into. Buy only on really sharp dips and focus on large cap stocks and select midcap and Smallcap stocks. Trade cautiously.

Markets opened with a bang on unexpected news of the HDFC Bank and HDFC Limited merger announcement on Monday morning. Thereafter markets corrected themselves and gained again only on Friday. At the end of the week, they closed with gains. BSESENSEX gained 170.49 points or 0.29% to close at 59,447.18 points. NIFTY gained 113.90 points or 0.64% to close at 17,784.35 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.37%, 1.54% and 1.70% respectively. BSEMIDCAP gained 3.52% while BSESMALLCAP was up 3.72%.

The Indian Rupee lost 11 paisa or 0.15% to close at Rs 75.90 to the US Dollar. Dow Jones lost 97.15 points or 0.28% to close at 34,721.12 points.

The unexpected announcement about the HDFC Twins merger came as a surprise and saw markets led by the twins registering huge gains. The gains on Monday saw BSESENSEX rise 1,335 points. Of this rise, HDFC Bank gained Rs 150.15 or 582.10 points while HDFC gained Rs 227.95 or 365.56 points. Effectively the twins combined gained 947.66 points or almost 71% of the rise in the BSESENSEX. Over the course of the week, these gains were given up. At the end of the week, HDFC was up Rs 7 or 0.29% while HDFC Bank was up Rs 9 or 0.60%.

RBI in its bi-monthly review meet kept key policy rates unchanged on expected lines. While the US FED is toying with the idea of a sharp increase in the next meeting of 50 basis points, the rates in India were kept unchanged. RBI wants to keep a check on inflation and is working on maintaining the same in a tight band.

Invesco, the investor who had a major dispute with Zee and the management sold 7.4 cr shares or 7.8% equity in ZEE Entertainment. While the buyers of the shares were not known from details available on the stock exchanges, this surely puts to rest the long pending dispute and opens up the acquisition by Sony of the company.

Shares of Ruchi Soya Industries Limited sold through its follow-on offer of Rs 4,300 crs listed on the bourses and created history. The shares were allotted at Rs 650 which was a steep discount to the traded price at the time of the FPO. People felt that the difference would narrow significantly. None of this happened. The discovered price was Rs 855 on NSE and Rs 850 on BSE. The share closed even higher at Rs 923.45 and Rs 925 respectively. This gives gains of Rs 273.45 or 42.06% to investors. Readers would recall that SEBI had asked the company to give an exit route to investors who had applied in the issue for two days. The overall subscription in the issue which was subscribed 3.80 times had reduced to 3.60 times. Even at the listing price of Rs 855, the returns were 31.5%. These returns are unparalleled in the stock market of any company which has issued shares through a follow-on offer and even more so the fact that the public holding has increased from 1.2% to roughly 19%.

Post the issue, the company has retired all debt and is now a debt free company. Further it has announced that it would dilute its shareholding by another 6-7% to achieve the minimum 25% share- holding required before 31st December. With this performance, the face of the company Baba Ramdev has already prepared the launch of the public issue from Patanjali at a later date.

In geo-political news, Imran Khan the Pakistan PM lost in a vote of no-confidence after massive drama. He continues the track record of no PM in Pakistan ever completing his full term. He also becomes the first PM to be ousted from office through a no-confidence motion. On the Russia-Ukraine front, the never-ending war just continues. It’s already 46 days old. There is no negotiation or settlement anywhere on the horizon.

Coming to the week ahead expect markets to continue their upward trend with corrections. The week gone by saw the BSESENSEX make a high of 60,786 points and a low of 58,876 points during the course of the week. Similar levels on the NIFTY were at 18,114 and 17,600 points. For the week ahead expect markets to trade higher. The lows of the previous week would act as strong supports while the levels of 61,000 on BSESENSEX and 18,300 points on NIFTY would act as resistances. The movement witnessed in the Smallcap and midcap space are indeed encouraging and would help the depth of the market to improve.

The trading strategy for the week should be to continue to buy on dips and sell on strong rallies. As the trading week has two trading holidays on Thursday and Friday, the volatility could be sharp and movement swift. Be prepared for profit taking if markets rally on all three days as Thursday would be a holiday exclusive to India while Friday would be a holiday in the US as well. Trade cautiously.