Markets opened with a gap at the start of the week on expected lines, but then lost on the next three consecutive days before a strong rear-guard action on Friday, the last day of the week saw markets regaining ground. With gains on just two of the three trading sessions, they could do so much and no more. BSESENSEX gained 360.81 points or 0.60% to close at 60,261.18 points. NSENIFTY gained 97.15 points or 0.54% to close at 17,956.60 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.50%, 0.50% and 0.49% respectively. BSEMIDCAP was up 0.02% while BSESMALLCAP was up 0.26%. 

The Indian Rupee had a strong showing during the week and gained Rs 1.40 or 1.69% to close at Rs 81.32 to the US Dollar. Dow Jones lost on the opening day of the week and then gained on the four remaining days consecutively. Dow ended the week up 672 points or 2.00% to close at 34,302.61 points. 

It’s interesting to note that FPI’s have been sellers on every day of the current year. They have sold over the ten sessions that have happened. Their total sales have not been very high, but they have sold shares worth Rs 17,400 crs on a net basis. Domestic institutions flush with domestic flows and SIP’s bought stock worth Rs 12,800 crs. 

Sankranti, the Indian festival which coincides with Lori and Pongal of the North and South, has been celebrated over the weekend all over the country. Readers would recall it is the popular kite flying festival and the entire Gujarat would spend the weekend on their terraces, flying kites. 

It was expected that the fortnight ahead would see a spate of public issues happening. Unfortunately, it appears that the same is not the case. No reported filings of updated DRHPs have been heard. Hence it could be presumed that the second fortnight of January could be a cold one as far as primary market issuances are concerned. For the record, of the nine listings since the 1st of December 2022, six are trading at a discount to the issue price while three are trading above the issue price. Not too good for record purposes and IPO market. 

TCS declared its October-December quarter results. Its net profit was at Rs 10,846 crs against Rs 9,769 crs in the year ago quarter. Revenues grew at 19.1% to clock Rs 58,229 crs against Rs 48,885 crs. EBIT margin was lower by 50 basis points at 24.5%. The company declared a dividend of Rs 8 for the quarter and a special dividend of Rs 67. Though the street felt that the results were a tad below expectation, share prices fell only during the day to bounce back. At the end of the period under review, they closed at Rs 3,374.20, a gain of Rs 162.20 or 5.04% against previous Friday’s close of Rs 3,212. 

Besides TCS, Infosys, HCL and Wipro declared results from the IT pack during the week. There is some amount of pressure on the margins being witnessed but new order wins are there. Growth seems to have moderated but continues at a pace which seems fair. Concerns in the IT space which were raised about a slow down seem to have come unfounded as of now. IT being an important sector for India and a big export earner has done reasonably well for itself. 

Interest rates on fixed deposits are moving up. The way one gets marketing calls or on a visit to the bank the push being made for fixed deposits gives an indication that money is becoming tighter and interest rates are set to rise. This could be true at least for the deposit side. Once deposit rates rise, lending rates rise as well, as the job of the bank is to earn a differential on the money handled. Expect the impact to be significant as rates continue to harden. 

The Union Budget is now virtually round the corner with a mere 11 trading sessions to go before the same is presented on the 1st of February. Parliament session begins on the 31st of January when the Economic survey would be presented. If there is to be a pre-budget rally it’s now or never. With markets having sustained the mid-week selling last week, it could be fair to assume that the momentum for the rally to begin is in place. FPIs are sellers but they have not pushed the market to sell. While in relative terms, valuations in India are not cheap compared to other emerging markets, there is an opportunity for growth as well.  

The lifetime highs were made on the 1st of December 2022. These were at levels of 63,583 on BSESENSEX and 18,887 on NIFTY. The next two lower tops were made on 14th December at 62,835 and 18,632 points respectively. The third and final one was made last week on 3rd January at 61,343 and 18,265 points. It is very important that if there is to be a pre-budget rally, this level is to be crossed at the bare minimum. Markets have gone down to the lows or around the lows but not broken them. They remain at 59,625-59,675 on BSESENSEX and at 17,760-17,795 on NIFTY. Over the last six trading sessions, these levels have been tested three times. It’s now or never. 

If markets are to turn weak in the immediate short term these levels would break on the down side and we would see selling pressure. If, however, markets turn positive, we would see these levels being held and markets crossing the levels of 61,343 and 18,265 early next week. The strategy would be to wait for levels to be breached in either direction. There would be swift movement thereafter. 

My gut feel says that this time the trend could be upwards with global cues also supporting the market trend. Dow after a long time has gained on four consecutive trading sessions and has been supported by Nasdaq as well. In India, the IT results have been supportive and markets have not taken the numbers from four top IT companies, in any negative manner. With a number of positives on hand, it’s the best time to push the pedal for the bulls. 

Expect markets to rally in the immediate short term. 

Trading in the calendar year began on a positive note with markets gaining on the first two trading sessions. They lost ground on the next three sessions with Friday witnessing a sharp sell-off. BSESENSEX ended the week with losses of 940.37 points or 1.55% to close at 59,900.37 points while NIFTY lost 245.85 points or 1.36% to close at 17,859.45 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.32%, 1.25% and 1.17% respectively. BSEMIDCAP lost 0.58% while BSESMALLCAP lost 0.50%. 

The India Rupee remained unchanged at Rs 82.72 to the US Dollar. Dow Jones began the new year on a negative note and lost on the first trading day. It then gained, lost and had a sharp rally on Friday, gaining a massive 700 points. The week ended with gains of 483.36 points or 1.46% at 33,630.61 points. 

There was one listing of a primary market issue from Radiant Cash Management Services Limited during the week. This issue had a poor response during subscription and the size of issue was reduced. The fresh issue which was for Rs 60 crs was reduced to Rs 54 crs, while the offer for sale of 331.25 lac shares was reduced to 212.22 lac shares. Further, even though the anchors were allotted shares at the top end of the price band of Rs 99, the remaining investors were allotted at the lower end of the price band of Rs 94. Merchant bankers were also allotted shares as part of their underwriting arrangement. 

The share debuted on the bourses on Wednesday at Rs 99.30, a gain of Rs 5.30 or 5.63%. They closed even higher at Rs 104.70, a gain of Rs 10.70 or 11.38%. At the end of the week shares closed at Rs 107.95, a gain of Rs 13.95 or 14.84%. The better performance of the share post listing is to do with the lower IPO size and it becoming imperative for the merchant bankers to justify their pricing and valuation for the company. 

The IPO market has taken a break temporarily and is likely to become active after the celebration of the India festival, “SANKRANT” also popular for kite flying on 15th of January. One should see a sudden rush of IPOs post this day into the week ending just before the Union Budget is presented on Wednesday, the 1st of February. Parliament session would begin a day earlier on the 31st of January. 

The week ahead would see a spate of results from the IT pack with TCS declaring results on Monday the 9th of January, HCL Tech and Infosys on Thursday the 12th of January and Wipro on Friday the 13th of January. This would give a good indication of what’s happening in the IT space with cost pressures or pricing pressures and new order wins. 

During the course of the last couple weeks of trading, the market seems to be making lower tops which is a bearish signal by itself. If one recalls, the lifetime highs were made on the 1st of December 2022. These were at levels of 63,583 on BSESENSEX and 18,887 on NIFTY. The next two lower tops were made on 14th December at 62,835 and 18,632 points respectively. The third and final one was made last week on 3rd January at 61,343 and 18,265 points. It is therefore imminent that if this bearish pattern is to be negated, we need to cross these levels at the very outset. 

Monday would see our markets rising sharply on the back of positive news flow from the US as far as job data and possibility of interest rate hike not being as quick as anticipated happening. At the same time, one must remember that FPI’s have been sellers over the last 11 consecutive days. Would they use the buoyancy on Monday to press further sales or turn positive? Not sure. 

Coming to the markets in the week ahead, as already mentioned they would open positive on Monday. How much and how far this rally would go is debatable. For the ensuing rally to be sustainable and meaningful, markets need to cross the first hurdle of the previous top of 61,343 and 18,265 and sustain them. Any failure to do so would result in further pressure as we would have made yet another lower top. On the support side, strong support does exist at levels of 59,650-59,750 and 17,770-17,800 levels. Any violation of these levels could lead to a further fall of 0.5% to 1% which could be a swift one. My gut feel for the moment is that currently neither the breakout or the breakdown looks likely in the coming week. The strategy should be to sell on rallies and keep a sharp lookout on US markets for news flow. Finally budget expectations could start being talked about in another ten days’ time when the present rally or move is over. 

Trade cautiously.