It was a bad week at the markets and they lost ground on all five trading sessions. The bulk of the losses were in the first three days and the pace of fall reduced thereafter. It certainly gave indications that after eight straight days of losses, there could be a bounce when they begin trading on Monday.
BSESENSEX was down 1,500.27 points or 3.85% at 37,462.99 points while NIFTY lost 433.35 points or 3.70% to close at 11,278.90 points. The broader indices like BSE100, BSE200 and BSE500 lost 3.61%, 3.56% and 3.49% respectively.
It was a after a very long time that I saw three heavyweights which happened to be from completely different sectors lose over 11% each in a week. The stocks were Tata Motors down 11.22%, Reliance Industries 11.09% and Tata Steel 11.01%. It indeed gives a fair picture of what happened. There were no sectoral gainers either and BSEIT was the so called best as it lost the least at -1.01%.
Dow Jones too was under pressure and lost 567.58 points or 2.12% to close at 25,942.37 points. Dow rose on Friday and gained 114 points or 0.44%.
Coming to the correction, which in eight trading sessions has wiped out almost 50% of the gains made over two months, it seems to be done. The rally began from 19th February which saw BSESENSEX make a low of 35,287.16 points. From there it rose 4,200.29 points to make a lifetime high of 39,487.45 points on 18th April 2019. From there after remaining sideways for some time, the fall began on 30th The 50% correction to this rise would be at 37,388 and we are currently about 75 points higher. In intra-day trade the low was 37,370 points which means the level was reached. Similarly, on NIFTY the rally began at 10,585.65 points, gained 1,270.50 points to touch 11.856.15 points. The 50% fall would be to 11,221.26 while the intra-day low on Friday was 11,251.05. The closing was 11,278.90 points and if these levels hold, could coincide with the correction.
points. Dow rose on Friday and gained 114 points or 0.44%.
What led to this correction is more significant. The first is that we had rallied quite strongly in two months without a correction. Secondly, there were reservations on whether the ruling BJP/NDA may or may not be able to form the next government. Thirdly, President Trump imposed duties of 25% against 10% on 200 billion dollars of Chinese imports with effect from midnight on Friday the 10th of May. All these factors rocked the market and helped complete the necessary technical correction.
The sixth round of voting for 59 seats was completed on Sunday the 12th of May. The seventh and final round of voting would be held next Sunday on 19th of May for 59 seats.
Yogi Deveshwar, Chairman Emeritus of ITC passed away at the age of 72 years. He was credited for changing the tobacco and cigarettes company to a large conglomerate having diversified portfolio of paper, hotels and FMCG products. Today less than half of its revenues comes from tobacco related products and the broader portfolio generates to the bottom-line.
What does the week ahead hold for the markets? It will continue to be volatile and choppy with two sided movements, however this time with an upward bias. Exit polls would be available only on Sunday evening next week and that would not impact trading this week. The strategy would be to look at corporate results and invest in companies which have shown growth with improved efficiencies. There are quite a few examples of such companies. One glaring example would be PNB Housing Finance which post results gained sharply on Friday. Further the parent, PNB Bank has sold stake at a premium of 20% plus to an investor. The stake sale price was Rs 850. Look for many such ideas in the market place. It should be remembered that value can only be found at times of stress or pain.
The strategy for the week ahead would be to remain calm and buy on sharp dips and sell on rallies. By the time you would be reading a similar column in the coming week on Monday the 20th of May, markets could be all over the place reacting to exit poll. One should note that exit polls are based on sample and have a lot of bias in them. Do not get carried away by them and when you have waited for a long 39-day election period, might as well wait for another 4 days for the results.
In conclusion, I strongly believe that markets may open weak on Monday morning but would certainly close in the positive.
