Markets began the week on a positive note with gains on Monday followed by a flattish Tuesday. Wednesday saw sharp corrections for reasons best unknown and then a sharp decline on Friday, post the Republic Day trading holiday which saw shares fall across the board led by the Adani pack. As a result of all of this, markets broke crucial support levels as well. This indicates that in the immediate short term we may see only corrective rallies while a sharp fall cannot be ruled out. BSESENSEX lost 1,290.87 points or 2.13% to close at 59,330.90 points while NIFTY lost 423.30 points or 2.35% to close at 17,604.25 points. The broader indices saw BSE100, BSE200 and BSE500 lose 2.47%, 3.09+% and 3.09% respectively. BSEMIDCAP was down 2.66% while BSESMALLCAP lost 3.51%.
The Indian Rupee lost 40 paisa or 0.49% to close at Rs 81.52 to the US Dollar. Dow Jones gained on all five days of the week, with Friday being more of a flattish day. It gained 602.59 points or 1.81% to close at 33,978.08 points.
January futures expired on Wednesday the 25th of January. They were under pressure on the last day and lost 299.05 points or 1.64% in the series. They closed at 17,891.95 points. The new February series began with losses of 286 points on the very first day of trading. A large part of the blame for the weakness can be attributed to the sharp fall in prices of Adani group shares led by Adani Enterprises which is in the midst of its follow-on offer of Rs 20,000 crs. This issue opened on Friday the 27th of January and would close on Tuesday the 31st of January.
The street attributes the same to a report from Hindenburg on Adani Enterprises. This attack by so called Hindenburg, is from the US based investment firm that specialises in activist short selling. Very clearly there is a vested agenda and the Adani group has clarified on the allegations made. The fate of the FPO still remains unclear which closes on Tuesday the 31st of January. The price band is Rs 3,112-3,276. Half the amount is to be paid on application and balance on call which would come much later. For retail applicants there is an upfront discount of Rs 64 available. The stock of Adani Enterprises closed at Rs 2,762.15 on Friday. The difference between the closing price and the floor price is Rs 350 and to expect that investors would apply in the FPO would be naïve when shares are available cheaper in the market than the FPO. At present levels, the floor price of the share and market price being far away, a reduction in price seems the only alternative if the issue is to be subscribed to. This outcome may happen only on Tuesday as there is no other instance of price being reduced midway through an issue, but only at the end.
The company or the Adani group has intimated that they would reply to the questions asked by the activist fund after the FPO is over. This would ensure that the panic in the share subsides and normalcy returns. Expect the share to stabilize over the next couple of days as markets look to the next course of action on the revised pricing front. For the records, the RHP states that the company may reduce the offer price by up to 20% from the floor price.
The week ahead sees the budget being presented on Wednesday the 1st of February. We are quite used to seeing or hearing or talking about a pre-budget rally. This time nothing of the sort has happened whatsoever. Further with just one day of trading post futures expiry, positions in the market are quite low and there is no clarity on market trends. Friday’s trading ensured that the last bull also probably squared his position and was waiting on the side-lines.
In such a scenario, with the last full budget before the general elections due in 2024, the FM has to deliver. No great expectations. She has the numbers behind her in terms of revenues from GST, corporate and individual income tax, and an economy which is fairly stable. While inflation and rising interest rates have hit the world, we are no exception either. However, we are better off than most of the world. She needs to address the issues of the salaried class and middle income who desperately need some relief on standard deduction and basic exemption limit. Some focus on PLI schemes extension and their enlargement, and the political direction to woman empowerment and child development. If all of this is done with the fiscal deficit kept under check, the budget would be hailed.
Having said what can be done, is done, What next? Markets will respect the presentation of the budget and rally. The fact that our markets are richly valued in the present context cannot be denied. There is outflow from our markets to some other markets happening. With a budget leading to growth being delivered, our aim to become a 5-Trillion economy in 2024-2025 would be achievable.
The strategy for the week would be to allow markets to move on their own for the first two days of the week. Post the budget, take positions if the FM delivers, on the long side. There is hardly much downside left at current levels. Crucial levels for the markets are 61,343 on BSESENSEX and 18,265 points on NIFTY being the crucial high points. With levels of 59,625-59,675 on BSESENSEX and at 17,760-17,795 on NIFTY acting as strong support on the lower side so far, being broken on Friday, new levels would be between 17,000-17,200 on NIFTY. These would correspond to 57,250-57,850 on BSESENSEX.
The downside levels mentioned above are medium term targets and may not happen immediately until and unless some disaster hits markets post budget. Keep your fingers crossed for the time being.

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.