It was a crucial week with markets extending sharp gains on the first two days of the week. They then corrected and surrendered a large part of the gains, but still ended the week with gains. They gained on three of the five trading sessions. BSESENSEX gained 509.41 points or 0.66% to close at 77,414.92 points while NIFTY gained 168.95 points or 0.72% to close at 23,519.35 points. The broader markets saw BSE100, BSE200 and BSE500 gaining 0.56%, 0.43% and 0.27% respectively. BSEMIDCAP lost 0.72% while BSESMALLCAP lost 1.39%. The movement in the markets has been very swift and it first caught the bears by surprise and then the bulls, where suddenly after a fourteen session rally, it seems like all is over. 

The Indian Rupee gained 51 paisa or 0.59% to close at Rs 85.47 to the US Dollar. Dow Jones had a torrid time when there was a broad sell-off on Friday with Dow losing 715 points. For the week, Dow lost 401.45 points or 0.96% to close at 41,583.90 points. Sticky inflation data and a sharp fall in consumer sentiment which lost 12% in February hit markets. To add insult to injury, tariff anxiety is making markets nervous. 

March series expired on Thursday the 27th of March on a positive note. The series registered gains of 1,046.90 points or 4.64% to close at 23,591.95 points. This is against the low that NIFTY made of under 22,000 in the first week of March. The rally has been very sharp with 1,900 points being gained in 14 trading sessions. 

Primary markets are in hibernation currently. The performance of companies which listed in January and February has not been the best. Of the ten main board issues which listed during January and February, as many as seven are trading below their issue price. This would be a challenge when promoters and merchant bankers launch issues in the future and try to justify their valuations. To revive the market, it would be advisable if valuations are lowered keeping in mind the markets and the poor performance of listed entities in recent times. 

The week ahead begins with a trading holiday on Monday and would therefore have four trading sessions. The week would be focused on events leading up to the 2nd of April, when Trump announces tariffs on the whole world. The impact of the sharp fall on Friday in Dow would be fresh on people’s minds when they trade on Monday onwards. The key reasons for the fall were the sticky inflation and sharp drop in consumer sentiment. Worries or anxiety on tariffs are actually haunting the market. The auto imports have become expensive with a 25% tariff. 

This would keep markets volatile and choppy when trading resumes on the 1st and would remain tentative on the 2nd as well. Wednesday night is when the final list would be announced. Our markets would therefore react quite sharply when they open for trading on Thursday the 3rd of April. 

Our markets have made some support at levels of 23,000 points on NIFTY and levels of 74,600 on BSESENSEX. While these would act as solid support, we have support at higher levels of 23,200 and 75,200 points respectively. Resistance is at the high made last week on Tuesday at levels of 23,800-23,900 and at 78,500-78,800 respectively. The strategy would be to buy with a tight stop loss at the support levels and any trading shorts with stop losses at the resistance levels. As long as markets trade in this band, they will be in no man’s land and would seek direction from events and news flow to react. The upcoming fortnight is flush with events like Trump’s tariffs, RBI’s policy review and of course quarterly and annual results due in next ten days onwards. 

The banking sector seems to be the front runner for the time being. ICICI Bank and Kotak Bank seem to be on their own while HDFC Bank is about to hit a new high. Even PSU banks seems to be getting ready to get into their act of rallying. This is likely to be the pillar of the rally in coming times. 

Coming to the strategy for the coming week, safety lies in the large cap stocks. While midcap and small cap did rally, they seem to have fizzled out quite fast. Probably the sustainability would be tested post results declaration and on showing growth, so that valuations look cheaper. In such a scenario, with markets not yet put of the woods, safety should be of primary concern and preservation of capital should be the first objective. 

Wait for clarity on 3rd morning before taking any positions and till then concentrate on large cap stocks. 

Trade cautiously.

Markets had a dream run last week and gained on all five trading sessions. The ensuing rally cumulatively has been the best one has seen in a week in about five years. Further this kind of rally in the last month of the financial year has come after about two decades. The question on one’s mind now is it it sustainable. How much juice is still left and what happens in April. 

BSESENSEX gained 3,076.60 points or 4.17% to close at 76,905.51 points while NIFTY gained 953.20 points or 4.26% to close at 23,397.20 points. The broader markets saw BSE100, BSE200 and BSE500 gain 4.77%, 5.04% and 5.35% respectively. BSEMIDCAP was up 7.09% while BSESMALLCAP was up 7.87%. It was a roaring comeback by the bulls and they have mauled the bears undoubtedly. 

The Indian Rupee had a spectacular recovery as well gaining Rs 1.02 or 1.17% to close at Rs 85.98 to the US Dollar. Dow Jones continued its volatile movement and gained 497.16 points or 1.20% to close at 41,985.35 points. 

The week ahead sees March futures expire on Thursday the 27th of March. The current value of NIFTY at 23,397.20 points is a good 3.57% higher for the series. With the entire gains coming in this week and also recovering some of the losses that the NIFTY has suffered, will the bears pull back from here, it certainly appears so. The March rally has been spectacular and raises questions on its continuing further. Not much has changed except the technical of the markets. It probably seems done for the moment and needs to consolidate over the remaining five trading sessions of the month remaining. 

The week saw a rally across the board and even the under pressure IT chipped in with small gains. The top performers were the capital goods, healthcare, realty and even the PSU sectors. The evergreen Banking sector chipped in with above average gains. 

The week ahead would have an extended weekend as the following Monday would be a trading holiday. This would put pressure on the markets on Friday as there would be a three day holiday while global markets would trade on Monday. The good part however would be that the new April series would have begun and being the first day, not heavily traded. With the sharp rally over the last week, and particularly over the last two days, bears and FPIs have been squeezed quite hard. This also led to FPIs buying quite aggressively, something not witnessed over the last many months. 

The next important event to look at would be announcements made on tariffs by Donald Trump on the 2nd of April. The impact of these announcements would be felt by us when trading resumes on the 3rd of April in Indian markets. It would make sense to study the implications before taking a meaningful exposure to markets.  

The strategy in expiry week would be to take profits if not totally, at least the majority of them off the table. The rally in midcap and Smallcap which have rallied later has been more than the large caps which is a worrisome factor. Anyway, markets correct short term anomalies faster than one can imagine. Trade in large cap and a select group of small and midcap which is identified by you and one has the comfort with valuations. January to March quarter results and annual results are a mere three weeks away and will throw light on the expected improvement in them. As mentioned in earlier articles, the markets need to build a base from which they can begin yet another rally over time. 

In terms of support and resistances, strong support exists at levels of 22,850-22,900 on NIFTY and at 75,550-75,700 on BSESENSEX. On the resistance side we have very strong resistance from the previous high at levels of 23,750-23,800 points on NIFTY and at 78,650-78,800 on BSESENSEX. With such a strong rally over the last five sessions and over two weeks overall where we have risen 4,300 points on BSESENSEX and 1,450 points on NIFTY, the need of the hour is consolidation. 

Trade cautiously.