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.

The week gone by had negative surprises for the market from the very first day of the week. Markets witnessed a sharp fall on Monday and then a nice rearguard action with recovery on the next three days where markets recovered about 60-65% of the opening day’s losses. Friday, markets fell again and the loss widened. At the end of it all, BSESENSEX lost on three of the five trading sessions and gained on two. It was down 759.58points or 0.98% to close at 76,619.33 points while NIFTY lost 228.30 points or 0.97% to close at 23,203.20 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.67%, 0.54% and 0.60% respectively. BSEMIDCAP lost 1.08% while BSESMALLCAP was down 0.78%. FPI selling continued unabated and now seems to be never ending. 

The Indian Rupee was under pressure and lost 64 paisa or 0.74% to close at Rs 86.67 to the US Dollar. Dow Jones recovered very smartly and was up on four of the five trading sessions. It gained 1,549.38 points or 3.69% to close at 43,487.83 points. Donald Trump would be sworn in as the US President tomorrow. The world is waiting to see what kind of duties are imposed by the US on China and the rest of the world starting this week. All that he has said during the election campaign would start to fall in place in the coming week if not later. What would happen to world markets would normally draw a comment as “God only knows”, would now be phrased as Trump only knows. In the coming week, markets would be extremely choppy and volatile. 

There were three listings in the week gone by with the first of them being from Standard Glass Lining Technologies Limited. The share listed on the bourses on Monday the 13th of January. Shares which were issued at Rs 140, closed day one at Rs 163.35, a gain of Rs 23.35 or 16.67%. By the end of the week, the price had moved up to Rs 190.41, a gain of Rs 50.41 or 36.01%. 

The second share to list was Quadrant Future Tek Limited which had issued shares at Rs 290. The shares listed on Tuesday the 14th of January and closed listing day at Rs 448.75, a gain of Rs 158.75 or 54.74%.  By Friday, the share gained further and closed at Rs 601.35, a gain of Rs 311.35 or 107.36%. 

The third company to list was the INVIT from Capital Infra Trust who had allotted units at Rs 99. The trust debuted on Friday the 17th of January. The INVIT closed at Rs 99.01, a gain of Rs 0.01 or 0.01%. Very clearly as details of dividend distribution were not spelt out in the offer document, the issue has seen a poor debut. Hopefully, details of the same would be available in course of time and that would help in the share price gaining from these levels as people invest in an INVIT on the basis of the yield. 

The week ahead would be crucial as we find that the market momentum has been broken and going forward, the same has to be restored, before any meaningful recovery may happen. FPI selling is yet another cause for concern. The strengthening dollar which has pushed bond yields way above the FED Interest rate is yet another cause for worry. All of this makes our markets vulnerable. 

Last week we barely managed to survive the break below key support area of 23,200 points. We did go below that level intraday on Monday to touch 23,047 points before bouncing back. The new support level now moves downwards to 23,050-23,230 points and we have closed for the week at 23,203 points. Already in danger zone and five days to go in this week. 

Very clearly its tough times for markets in the week ahead. Resistance is around 23,450-23,500 points and then higher at 23,750-800 points. On the downside if this time around 23,050 points level breaks, we are looking at a sharp downturn of 200 plus points to follow. Whether it would happen or not Trump only knows. 

The strategy for the week would be to play defensive with only the large cap stocks and staying away from the mid and small cap stocks. Avoid intraday moves unless they are sharp in either direction. Even though volatility would persist, the results declared so far do not give any great comfort at this point of time. To sum up its tough times and with uncertainty looming large.  

Trade cautiously.