Markets behaved on expected lines, after rising they corrected. The correction that happened on Friday was sharp and that changed the sentiment on the street. Events in the US seem to be shaking global markets. BSESENSEX lost 220.86 points or 0.61% to close at 35,742.07 points. NIFTY lost 51.45 points or 0.48% to close at 10,754 points.

US Fed raised interest rates to trade in the range of 2-2.25% and indicated that there would be two more rate hikes in the calendar year 2019. Markets did not like the hike and reacted sharply. Crude oil fell below 55 dollars and, in the process, made a 17-month low. A strong dollar was enough for the bears to maul the oil bulls and in the process they did so similarly also in the equity markets. Dow Jones cracked and lost 1,655.14 points or 6.87% to close at 22,445.37 points.

The Indian Rupee appreciated Rs 1.75 or 2.43% to close at Rs 70.15 to the dollar. While the fall in crude prices is great news for India, the fall in equity markets and Dow may not. In any case it is believed that 2019 may not be a great year for the US equity markets in any case. Even in India the possibility of 2019 being a tough and volatile year for equities in lieu of the upcoming elections could be a reality.

The intra-week high on the BSESENSEX was 36,554 and there was a sharp fall on Friday which did the damage. Similarly on NIFTY the intra-week high was 10,985. Looking from the high the fall is 800 points on the BSESENSEX and 230 points on NIFTY. Nothing to big but the only concern is the fall that happened on Friday.

The week ahead sees December futures expire on Thursday the 27th. The current value of NIFTY at 10,754, is down 104.70 points or 0.96%. With there being a holiday on Christmas for the markets, it means that there are three days for expiry. While the difference is insignificant, and the series could go either way, the possibility of markets rising from here on, looks likely as Dow has fallen quite sharply in the last 10 days or so. With a mere four trading days to go before 2018 calendar year ends, expect sharp volatility to be there on low volumes. Dow Jones on a year to date basis is down 9.20% and is trading virtually at the year’s low. Indian markets have fared much better and the benchmark indices continue to trade positively with BSESENSEX up 4.72% for the year and NIFTY up 2.08%.

Post the election results where the ruling BJP lost three Hindu heartland states, GST rates in the 28% tax slab have been tinkered and six items have seen rates being reduced. With this reduction a mere 28 items remain in the category which has luxury and sin goods. With just under five months to go for elections the government is likely to do course correction to take care of certain issues seen as affecting the party’s supporters and votes.

The markets will be volatile on low volumes in the last four trading sessions before the year comes to an end. Refrain from any reckless trading and use any sharp dips to buy and strong rallies to sell.

What a week it was! There were election results and the ruling BJP lost three Hindi heartland states, and yet markets closed positive for the week. Strange are the ways of markets and sentiment. They were down on Monday and down on Tuesday quite sharply before a recovery began and the same was good enough to help markets close in positive territory for the week. The BSESENSEX gained 289.68 points or 0.81% to close at 35,962.93 points. NIFTY gained 111.75 points or 1.05% to close at 10,805.45 points. The intra-day lows on Tuesday were 34,426 points on the BSESENSEX and 10,333 points on NIFTY. This effectively means that from these lows the BSESENSEX gained 1,540 points while NIFTY gained 470 points. The broader indices saw the BSE100, BSE200 and BSE500 gain 1.42%, 1.58% and 1.70% respectively. BSEMIDCAP was up 3.23% and BSESMALLCAP 2.82%.

The Indian Rupee lost Rs 1.10 or 1.55% to close at Rs 71.90 to the US Dollar. Dow Jones was up on a weekly basis but came under pressure on Friday losing almost 500 points and closed with losses of 288.44 points or 1.18% at 24,100.51 points. The issue of the arrest of CFO and daughter of Hua Wei boss in Canada and subsequent granting of bail has created a stir. China has subsequently arrested two Canadian nationals and the issue is unlikely to die down quickly. The trade wars between China and US have taken a new turn with this development. Trump being what he is, would be unperturbed by this action, but the same could be the beginning of another type of war and one in which there are no winners only losers.

In economic data, inflation has reduced, and this would weigh on RBI’s mind when they meet the next time to discuss policy rates. They have also forecast softer inflation going forward. Our markets also saw large amount of short covering post Tuesday when markets began their recovery. This was on the back of market pundits taken the election results in their stride and discounting the outcome and the link to what could happen in the general elections due in April-May 2019.

The Delhi court ordering a status quo on the sale of Fortis is a strange one. The sale has been concluded with the preferential allotment of shares having been made. The open offer is a consequence of the preferential allotment and is mandatory under law which SEBI has framed. How long this stay would remain is a matter of time and conjecture. I believe this is incorrect and is only a stalling process and not beneficial to anyone. The legal team of Daiichi has missed the bus and is barking up the wrong tree.

FII’s are back with their buying ways and are looking at India as they realise that US may not deliver expected returns. Further the correction in prices and the expected likely improvement in corporate earnings and economic data, make India an attractive destination for overseas investors. The added icing on the cake is the negative mindset of most people and their current short positions. These are enough ingredients to point to a short-term rally in the market place.

With the calendar year coming to an end, and new investment allocations yet to be made, things could be quieter in the week ahead. I believe markets would consolidate before moving up further in the latter half of the week. Ride the gains and wait for dips to add to your position. With bulls back in control, it appears this would be yet another series in their favour when it ends on 27th December. Currently the December futures at 10,805 are down 53 points or 0.49% for the month so far.

Ride the rally and hold on to your longs for the time being. Volatility is likely to reduce, and markets would be more circumspect in the coming days. A final burst with sharp short covering is around the corner. Enjoy the upside moves as they unfold.