It was an evenly fought week where bears had the upper hand for the first two days and then the bulls for the next two. Friday was neutral with there being no winner. The net weekly result saw the BSESENSEX gain 62.53 points or 0.17% to close at 35,871.48 points. NIFTY gained 67.25 points or 0.63% to close at 10,791.65 points. BSEMIDCAP was sharply up at 1.64% while BSESMALLCAP gained even more and was up 2.00%.

Dow Jones managed gains of 148.56 points or 0.57% to close at 26,031.81 points. There is uncertainty in the US on two counts. Firstly it is with the construction of the border wall with Mexico where there is opposition from the Democrats and was responsible for the longest shutdown in the US ever. Secondly, with almost two of the three-month window for solving the US China issue on duties over, very little progress has been made. This could snowball into yet another crisis. It appears realising this Donald Trump has extended the deadline, but that does not take away the uncertainty.

After five weeks, Friday fury has subsided. Over the previous five weeks, every Friday saw a NIFTY stock bearing the brunt and falling sharply on various grounds whether it be results, corporate governance or regulatory issues. The stocks involved were Yea Bank, Dr Roddy’s, Sun Pharma, Zee Entertainment and Tata Motors. Fortunately this week we had none and this helped the market close with minor gains which were more widespread in the broader markets.

The Supreme Court has come down strongly on Anil Ambani and threatened to hold him in contempt of court if he does not pay the amount to Ericson in the next four weeks. The easiest deal that can be done is selling the stake that Reliance Capital holds in Reliance Nippon Asset Management Company Limited. This stake at current market prices would fetch Reliance Capital about Rs 5,000 crs. The current market capitalisation of Reliance Capital is Rs 4,138 crs as of Fridays closing price of Rs 163.75 on BSE. A point to be noted is than Nippon is an equal stake partner in the company and is also managing the company on a day to day basis. This ensures that no due diligence is required for buying the additional stake.

There would be issues of open offer, delisting and offer for sale from Nippon if the deal does happen, but those would be issues once the stake sale is finalised. Broadly speaking there could be two options for Nippon, one to remain listed and the second to delist. The second is the easier one where at the time of making the open offer he states that he intends to delist if he receives shares in the buyback which would take his holding to 90%. In case of the former he would have to sell through an OFS the shares in excess of 75%. Irrespective of any option chosen by Nippon, if the deal does go through, the best bet in the market for the short and medium-term would-be Reliance Capital.

The strategy going forward would be to buy select stocks as the valuation looks more than attractive. Some of the PSU stocks seem excellent investments at current prices. If one is not confident of buying a stock, a good alternative would be to buy the two ETF’s of PSU entities. CPSE ETF and Bharat 22 would be excellent bets in the current market where these shares have been hammered to prices which are less than intrinsic value of the underlying stocks. Both ETF’s had fresh offerings during which prices of the underlying were beaten down. With nothing in the offing in the next four months now possible with election notification expected shortly, they look excellent bets.

The week ahead sees February futures expire on Thursday the 28th of February. The current value of NIFTY is lower by 39.30 points or 0.36%. January Futures had expired at 10,791.65 points. With neither the bulls or bears having a control at this point of time, the bulls would have an edge because markets see to have stabilised.

With expiry mere four days away, markets would continue to remain volatile and trade with a positive bias. Plan your strategy accordingly.

Markets fell on all five trading days last week and were volatile on expected lines. BSESENSEX lost 737.53 points or 2.02% to close at 35,808.95 points. NIFTY was down 219.20 points or 2.00% at 10,724.40 points. The broader market lost a little more with BSE100, BSE200 and BSE500 down 2.33%, 2.26% and 2.30% down respectively. The bigger pain continues to be in the mid and small cap which were down 2.71% and 2.96%.

BSEMIDCAP is less than 3% away from making a new 52 week low while BSESMALLCAP is at a 52-week low. The problem with these small shares is that there seems to be no level at which they would stop. They seem to be just falling non-stop and there are no levels for support for these stocks. In sharp contrast, the BSESENSEX is about 8% higher than its 52-week low.

Dow Jones had a positive week and gained 776.92 points or 3.09% to close at 25,883.25 points. The Indian Rupee gained 8 paisa or 0.11% to close at Rs 71.22.

Results season is over and there have been some positive takeaways from them. Many of the companies have posted positive results and the leaders are back in focus. Clearly the auto sector and the ancillary makers have been under pressure with the largest auto maker Maruti seeing a slowdown. The impact of this is likely to remain for a couple of quarters. Even this week the auto majors barring Tata Motors were down sharply.

The terror attack on the CRPF by a suicide bomber who blew up his vehicle against an oncoming convoy was indeed most unfortunate and has raised spontaneous protests from the common man against such attacks. The world unitedly has condemned the attack and asked Pakistan to take immediate action. It has added to the political tension with elections due in about two months.

The window of new announcements and projects to be launched in the run-up to the election being notified is about three weeks away. Expect a slew of them as we get ready for the other of all election which will be a watershed one. Many parties would be fighting this election for their survival and a poor showing this time around could be disastrous for their future. This situation would make this election dirty and rhetoric would be at an all time high. Expect drama and unexpected developments to take place which would be more eventful than some of the soap operas for their twists.

The knack with which market finds its weekly bogey stocks simply continues. This week it was the turn of Apollo Hospital and Emami which has a large portion of promoter shares being pledged. Emami lost Rs 24.90 during the week or 6.90% after losing Rs 27.25 in the previous week to close at Rs 360.85. Apollo Hospital lost Rs 118 or 10.34% to close at Rs 1,141. With promoter pledge becoming such a big concern, one is finding that shares seem to just tumble.

The broader issue is that a large portion of this financing has been done by mutual funds and some of it by NBFC’s. The golden run of mutual funds which saw huge inflows through SIP post demonetisation seems to have run its course and come to a complete halt. Live SIP accounts have fallen to 1.87 lakh accounts in December 2018 from 4.81 lakh accounts in April 2018. With the current state of the market being what it is, this situation is likely to worsen as returns are negative from the stock market.

Markets in the week ahead would continue to be under pressure and would look to find their level of support and make a base. They would continue to be volatile in this process. New revelations of promoter pledge would keep trigger happy market traders in a gleeful mood. Simple strategy would be to look to develop a portfolio from the current valuations which are compelling in many cases. Be choosy and greedy in stock selection and timing. Final advice, don’t buy everything at one time.