Markets were on a roll last week and gained on four of the five days of trading. They just did not gain, they galloped. The BSESENSEX was up a massive 1,863.14 points or 5.75% to close at 34,287.24 points. NIFTY gained 561.85 points or 5.86% to close at 10,142.15 points. The broader indices like BSE100, BSE200 and BSE500 gained 5.71%, 5.84% and 6.07% respectively. BSEMIDCAP gained 6% and BSESMALLCAP fared even better gaining 8.84%. Circuit filter limits were revised from 5% upwards to 10% and 20% in many scrips on Friday and that helped the Smallcap and midcap indices outperform the benchmark indices.

Dow Jones had yet another week of big gains and was up a massive 1,727.87 points or 6.81% to close at 27,110.98 points. With this gain, the Dow Jones is a mere 5% down since its opening level of 1st January. In comparison, the BSESENSEX is almost 7,000 points or 16.88% lower than the corresponding period of 1st January 2020. NIFTY is lower by 2,026 points or 16.65%. The Indian Rupee gained 4 paisa or 0.05% to close at Rs 75.58.

Reliance Industries which had in the last week completed its rights issue subscription was oversubscribed a massive 1.589 times. The issue of 42.26 cr shares received subscription for 67.16 cr shares. Details of the allotment are yet to be made public. While the issue remains a success, it leaves a sour taste for the small shareholder who has been the backbone of success for the Dhirubhai Ambani culture of small shareholder. This category of investor who in number were 19.80 lac shareholders of the roughly 25 lac public shareholders, holding shares in the category of 1-500, seem to have just missed out on the issue. The total number of people who have applied for the issue is 5,55,277 applications. This is roughly a little more than a fifth of the number of public shareholders. This category as per balance sheet of 2018-19 held an average of 94 shares and were thus entitled to apply for 6 shares as rights. One has for the point of convenience ignored the people who held shares in physical form.

What went wrong that such a large number of shareholders missed out? No aspersions on the quality of the issue or the price at which the shares were offered. It is the convenience of the people and the wrong understanding of the people behind the issue that these 20lac investors had the wherewithal to have a printer/scanner at their disposal in these days of lockdown. With umpteen number of advertisements released in multiple newspapers on many days, why did the company not feel it appropriate to publish a facsimile of the one page of the application form as part of the advertisement, beats me. People would then have taken a cut-out of the same, filled it and submitted to the bank. Very poor understanding of the shareholder and causing heartburn to this large population of shareholders who are at the bottom of the pyramid. God forbid if in the present mood of the markets if share price of Reliance moves up another 10% and touches say Rs 1,750, the shareholder will feel a notional loss of Rs 500 per share. These shareholders would then vent their ire on the management when the virtual AGM is held.

While SEBI the regulator has brought in many innovative measures to tackle the hard and difficult times that the nation and the world is passing through, it must take this as a test case and analyse the difficulties of the bottom of the pyramid shareholder and ensure that the policy and guidelines are inclusive in nature and not exclusive. Technology should benefit not be the cause of loss or heartburn.

Covid-19 continues to hog the limelight and the number of cases globally have moved up to 70.91 lacs, with 4.061 lac deaths and 34.61 lac patients recovering. India which was a slow starter is fast playing catch up and we have moved up to the 6th largest number of cases at 2.575 lacs with 7,207 deaths and 1.238 lac patients recovering. Since last week, the world has seen an addition of 8.28 lac cases, 32,300deaths and 6.2 lac people recovering. In India, the number of new cases has increased by 67,000 with 1,800 deaths and 31,100 people recovering. Maharashtra continues to lead the country with almost 86,000 cases, over 39,300 people recovering and 3,060 deaths. The number in Mumbai is 48,774 cases with 1,638 deaths and 21,190 people recovering. Unlocking of the country is happening from today in other than the containment zones and there is every likelihood that cases could spike but herd immunity is a must for a virus which is here to stay. We need to build the immunity from the same and ensure better standards of hygiene and improve one’s own health.

Markets in the last two weeks have gained just under 12% and give an impression that the economy is roaring. Data however speaks in a completely different language and does not match reality. The unfortunate part is that over the last few days, a left-out feeling has started creeping into investors and this could cause the rally to become wider and see more market participation. It is not my intention to make readers nervous or suspicious but cautious to the fact that one must buy only quality. Do not buy because something has not moved and is likely to move. You may turn out to be right for the moment, but when things reverse, heaven help.

The strategy should be to book profits on any flare up in the benchmark stocks and allow the smaller and midcap stocks to play catch up. Be cautious in what you buy and be nimble footed at the first sign of danger. Volatility will further increase making life that much more difficult. Tough times are still here and realty check is completely different from what market indices indicate.

Stay cautious and trade with extreme caution.

Markets were on a roll last week and registered sharp gains in tune with the rest of the world. They were virtually flat on Tuesday with Monday being a holiday and rose sharply on the remaining three days including expiry day. BSESENSEX gained 1,751.51 points or 5.71% to close at 32,424.10 points while NIFTY rose 541.05 points or 5.99% to close at 9,580.30 points. The broader indices saw BSE100, BSE200 and BSE500 rise 5.88%, 5.67% and 5.54% respectively. BSEMIDCAP rose 5.09% while BSESMALLCAP rose 3.50%. The top sectoral gainer was BSEBANKEX which was up a massive 11.18%. The banking and financial services sector was beaten down and was under tremendous pressure considering the lockdown and virtual closure of all commercial activity. Further people in the market had shorted these counters and as stock prices rose it led to massive short covering as well.

The Indian Rupee gained 33 paisa or 0.43% to close at Rs 75.62 to the US Dollar. Dow Jones had another week of gains and was up 917.95 points or 3.75% to close at 25,383.11 points.

May futures saw the bulls making a strong comeback in the last three days and recovering as much as 450 points. It wasn’t enough to pull the series back and May futures expired with losses of 369.80 points or 3.75% down at 9,490.10 points.

The promoters of Adani Power intent to delist the shares of the company and have proposed to discuss the same at the bard meeting on 3rd June. The book value of the share is just under Rs 41 and the closing price on Friday was Rs 36.40. This counter could be in action even after the board meeting based on the price recommended.

Markets are very interestingly poised and we have witnessed a rare chart formation on the monthly indices. There has been an inside month to an inside month. Let me explain. The high and low in March on the BSESENSEX was 39,083 and 25,638 respectively and the month closed at 29,468 points. In April the high was at 33,887 points which was lower than the March high and the low of the month was 27,500 which was higher than the March low. The month closed at 33,717 points. In May the high was at 32,845 which was lower than April high and the low was 29,968 which was higher than April low. The month closed at 32,424 points. What this formation indicates is that if there is a movement which crosses the previous months high or low and sustains, there would be a breakdown or breakout which could be sharp and very volatile. Unfortunately, it does not indicate at this stage in which direction that would happen.

The same has happened in NIFTY as well with the monthly numbers as follows. March the high low was 11,433 and 7,511 with the close at 8,597. In April the high low was 9,889 and 8,055 with the close being 9,859 points. In May the high low was 9,598 and 8,806 with the close being 9,580 points. The crucial levels for us therefore become 32,850 on BSESENSEX for a breakout and 29,950 for a breakdown. Similarly, on NIFTY, the breakout level comes at 9,600 while the breakdown level is at 8,800 points. As the pattern indicates, the range is becoming narrower but intraday volatility is increasing.

On the covid-19 front the number of people affected globally has increased to 62.63 lac people with 3.73 lac deaths and 28.46 lac people having recovered so far. In India, the number of people affected has increased to 1,90,600 with 5,408 deaths and over91,800 people having recovered. Compared to the previous week, the world has seen 7.61 lac new patients, 27,000 deaths and 5.44 lac patients recovered. In India, the number of new patients has increased by 48,700 while deaths have gone up by 1,539. Patients recovered has moved up by 37,400. Very clearly the recovery rate has registered significant growth globally and more so in India. In India, the worst affected state continues to be Maharashtra with over 67,655 patients, just about 2,286 deaths and 29,329 people having recovered. The financial capital of India Mumbai, could also be called the covid-19 Capital with just under 39,700 cases, 1,279 deaths and 16,791 patients having recovered.

The central government has announced a new set of guidelines for the next stage of lockdown with many relaxations for the country as a whole except containment zones and a few select leading cities where the affected people are very large. States have to take a call on relaxations in their respective areas.

Trading in renunciation of Reliance rights issue ended on Friday on the bourses. The range of the price was from Rs 152 on the opening day to Rs 258.30 during the seven days that the same was permitted. The closing price was Rs 222 for the rights renunciation and Rs 1,465 for the share, implying a difference of Rs 208 between share and rights price. The effective premium on the renunciation has reduced this week to Rs 14 against Rs 50 in the previous week. The rights issue closed on Wednesday the 3rd of June and it would be interesting to see how many of the small shareholders of Reliance in the 1-500 shares held, actually mange to subscribe to their rights issue.

The week ahead would be crucial and it makes sense to remain on the side-lines until clarity emerges about the breakdown/breakout as mentioned earlier. One needs to be rest assured that once the event occurs there would be substantial movement in the direction in which the event has occurred. Wait for the trigger before taking any meaningful positions in the market.