Markets managed gains in the last week but seem to have become extremely vulnerable. The BSESENSEX gained 132.77 points or 0.50% to close at 26,759.23 points. NIFTY gained 58 points or 0.71% to close at 8,243.80 points.
Against this rise, sample the fall from Friday’s intraday high of 27,009. The fall from the high to the close was 250 points which is almost double of the weekly gains. One single day extreme volatility was witnessed and technical signals have issued alerts. Another way of looking at the same thing is that the fall was so much more than what the market struggled to gain over four days. On the NIFTY the high on Friday was 8,306.85 points. The fall was 63 points against the weekly gain of 58 points, a variation of 1.1 times.
IT stocks bore the brunt of the selling and registered huge losses. The big concern currently is lack of triggers and markets gaining for absolutely no attributable reason whatsoever. Volumes are thin and institutional activity fairly low. In such a scenario it makes trading difficult and dangerous.
Elections have been notified in five states. They begin with Punjab and Goa going to the polls on 4th of February. These are followed by a five phase poll which begins in Uttar Pradesh on the 11th of February and ends on 8th of March. In between Uttrakhand would go to polls on 15th of February and Manipur on the 4th of March. Counting would be held on Saturday the 11th of March. The elections are being held in the backdrop of demonetisation and would be seen as a referendum on the 32 month old BJP led NDA government.
The Union Budget is to be presented on the 1st of February. There would be no separate Railway Budget and it would be a part of the Union Budget. Both houses of Parliament would convene on 231st of January and would be addressed by the President. The opposition is currently opposed to the budget being presented before the elections. The shifting of the budget is an exercise which has been going on for over two months. While there is an appeal pending before the election commission it appears unlikely that anything would come out of it.
The US is again debating H1-B visas. They want jobs to be given to locals and the cost to be incurred by hiring a local against the offshore person would increase costs from 60,000 dollars to 100,000. This would impact the margins of software companies significantly in the short run. With TCS due to announce results on Thursday the 12th of January and followed by Infosys on Friday the 13th, one hopes there would be clarity on the issue and the sector.
Markets are looking vulnerable and results for the quarter would decide further course of action that they take. Stay on the sidelines and use rallies to sell while sharp dips would be opportunities to buy. We are in what one could say is a drift mode or directionless mode.
