Markets continued to be volatile and were down during the first two days of trading. BSESENSEX had lost about 300 points in the first two days and then staged a smart recovery to end in positive territory. BSEMIDCAP had lost 300 points and there was buying by promoters in their shares looking at the attractive opportunity to enter their own stocks. BSEMIDCAP gained 500 points in the next three days. BSESMALLCAP lost 750 points in two days and managed to gain 650 points. What is important to note is that there was a sharp correction and then a rebound, but its not all over again.

The BSESENSEX gained 0.61% on a weekly basis while NIFTY gained 0.66%. BSEMIDCAP was up 1.06% but BSESMALLCAP was down 0.54%. The realignment of mutual fund schemes as mandated by SEBI was the main reason for the fall in the mid and small cap stocks. In general, there is lack of interest in the market and the fact that FII’s have been sellers for the last few months is weighing on the minds of investors.

RBI had its monetary policy review meet and hiked interest rates on expected lines. Repo rate was increased by 25 basis points to 6.25%. This hike is after four and a half years where rates have been kept unchanged. The last revision was in the January 2014 meeting. The hike was unanimous with all the members of the committee recommending the price hike. The street expects that this was the first of many more such hikes and in this financial year there could be another two to three hikes in the remaining part of the year.

Crude has moved up again after having fallen for some time now. While the rise in crude oil prices looks more to do with supply side issues, with OPEC trying to force its way, things could remain heated. In line with the rise in crude prices the value of the Indian Rupee fell and lost 44 paisa or 0.65% to close at Rs 67.50.

ICICI Bank board has not been able to complete its reply to SEBI and has sought more time. Very clearly the noose is tightening, and things are becoming uncomfortable for the players in the drama. In the case of Fortis, the company has received intent and would be receiving final bids from four suitors.

With realignment of mutual fund schemes partially done and more to follow, markets particularly mid and small cap would be volatile and therefore provide opportunities to buy on dips. Be patient and choosy over the next couple of weeks to use such occasions to buy.

It was a volatile week on expected lines and expiry of May futures made it super dramatic. Bulls who were not having the upper hand mauled the bears on expiry day and saw the BSESENSEX gain 416 points while NIFTY gained 122 points. For the week BSESENSEX gained 302.39 points or 0.86% to close at 35,227.26 points. NIFTY gained 91.05 points or 0.85% to close at 10,696.20 points. But for the heroics of Thursday, there would have been weekly losses.

The Indian Rupee which has been under pressure for some time staged a smart recovery and gained 72 p or 1.07% to close the week at Rs 67.06 to the US Dollar. This matched the softening of crude oil prices and was a big relief to the government. Further the proposed sanctions on Iran would also help India as we are one of the biggest consumers of oil from that country and we follow UN sanctions not US sanctions.

Last week I had spoken about three companies becoming test cases going forward. Lot of water has flown under the bridge since then and things are happening. In the first case a probe has been ordered by the board of ICICI Bank into the matter concerned. The MD&CEO is on annual leave which is planned, or coincidental only time will tell. In the second case the new directors on the board of Fortis Hospitals have called fresh bids from the participating bidders and hopefully a sale would happen in due course. In the case of Binani Cement, the consortium of lenders has approved the bid of Ultratech Cement which was the highest bid.

SEBI has through a circular directed mutual funds to realign their schemes in terms of market capitalisation where the top 100 stocks by market cap would be classified as large cap stocks. The next category of midcap would be from 101-250, while small-cap would be from 251 onwards. A large cap fund would have to invest 80% of its corpus in stocks from the top 100 while a midcap fund would have to invest 65% from its category. Similarly, a large and midcap fund would have to invest 35% each into large and midcap funds. The balance could be from other categories. The realignment is currently on and schemes are expected to complete this process by the end of 30th June. While in the case of large cap holdings there is hardly any concern the problem can be seen in small-cap which begin with a market cap of below 8,600 crs based on the top 1000 ranking for the period June to December 2017. The 250th stock has a market cap of Rs 8,600 crs based on average market cap for the period July to December 2017. This realignment would offer ample buying opportunities for the smart investor. As far as mutual funds scheme this would benefit the retail investor as the scheme would be self-explanatory and it now be possible to compare different schemes from different funds. More importantly one would be able to compare schemes of different fund houses as apples to apples and oranges to oranges.

Volatility is likely to continue in the market and would provide ample of buying opportunities.