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.
