Markets were on a roll in the week gone by and continued to gain strongly. BSESENSEX gained 1,074.85 points or 1.84% to close at 59,462.78 points while NIFTY gained 300.65 points or 1.73% to close at 17,698.15 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.70%, 1.75% and 1.71% respectively. BSEMIDCAP gained 1.17% and BSESMALLCAP was up 1.09%. Markets gained on three of the four trading sessions and they had a minor correction on the fourth day.

The Indian Rupee lost 43 paisa or 0.54% to close at Rs 79.66 to the US Dollar. Dow Jones had a strong week and gained on four of the five trading sessions. It was up 957.58 points or 2.92% to close at 33,761.05 points. 

Inflation seems to be coming under control and the rate seems to have come down for the month of July at 6.71%. This is good news and would help RBI take a controlled measure when they meet next in October for the monetary policy meeting to decide on interest rates.  

Our markets were helped by the fact that FPI’s who have been aggressive sellers bought stock in the week gone by. On a weekly basis, they were buyers to the extent of Rs 7,850 crs. In the month of August, they have been net buyers of Rs 14,850 crs. It’s indeed a positive sign. 

After a lull of over two months an IPO is hitting the markets. The issue from Syrma SGS Technology Limited is tapping the capital markets with its fresh issue of Rs 766 crs and an offer for sale of 33.69 lac shares. The price band is Rs 209-220 and the issue opened on Friday the 12th August and would close on Thursday the 18th of August. The company is an EMS manufacturer catering to Automotive, Consumer, Healthcare, Industrial, IT and Railways and other segments or verticals. The company had reported an EPS of Rs 5.17 on proforma, condensed combined financial information for the year ended March 2022. The price earnings multiple based on this is 40.43-42.55. This is comparable to the listed peers Dixon and Amber which are much more expensive.

The company has signed up for the government’s PLI (production linked incentive scheme) in the consumer appliances and telecom sectors. It would be investing Rs 156 crs under the scheme. Besides the above investment, the objects of the issue envisage a further capex of Rs 350 crs in the immediate 15-18 months. The company has an asset turnover of about 5.1-5.4 times its gross block which gives huge opportunity for ramping up revenues in the coming 36 months. With sustainable margins in the region of 10.5-11.5% at the EBITDA levels, the company has a bright future ahead of it. The issue which had opened on Friday, is already subscribed 0.37 times with three days to go. An added comfort is the fact that the company had allotted shares in a pre-IPO at Rs 290 to marquee investors. The share warrants subscription. 

Coming to the markets, they have been on a roll and have risen from levels of 51,000 on BSESENSEX and 15,200 on NIFTY from the 17th of June. The rally has been sharp and sustained. It’s time that after this meaningful rally it needs to consolidate at some point of time if there is to be any further rise. Expect the week ahead which has four trading days to see some consolidation after early gains. The levels of 60,000 and 17,850 on the benchmark indices could be levels from where we could see markets turn and pause to take a breath. Assuming they do so, the first key levels of support would be 58,400-58,600 and 17,350-17,400 respectively. The next level of support which is unlikely this week would be around 57250-53400 and 17,100 respectively. I do not expect the second level this week. 

The trading strategy would be to sell into the strength witnessed on opening on Tuesday. Allow the heated markets to cool off and use the opportunity to lighten positions. In the correction which would be sharp, one could rebuild positions all over again. Results season is over and there would be no surprises on this account. 

Movement from hereon would be swift and sharp in both directions. Be nimble footed to derive maximum benefit.

Markets have a mind of their own and the best-off predictions do go wrong. In the week gone by, markets chose to climb a wall of worries and also ignored global cues. They gained on four of the five trading days and lost on just one. BSESENSEX gained 817.68 points or 1.42% to close at 58,387.93 points while NIFTY gained 239.25 points or 1.39% to close at 17,397.50 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.40%, 1.57% and 1.59% respectively. BSEMIDCAP gained 1.78% while BSESMALLCAP gained 2.03%. 

The Indian Rupee was volatile and under pressure. It however managed to remain flattish and gained 2 paisa or 0.03% to close at Rs 79.23 to the US Dollar. Dow Jones gained on two of the five trading sessions and lost on the other three. It closed with small losses of 41.66 points or 0.13% at 32,803.47 points. 

Interest rates are being raised across the world with Central banks worried about inflation, particularly retail inflation led by food and energy costs. Reserve Bank of India raised repo rates by 50 basis points to 7.2%. This makes the hike over the three meetings in May, June and August to 1.40%. RBI has maintained its GDP forecast at 7.2% and expects retail inflation at 6.7% for FY22-23. 

In yet another development, the Bank of England raised interest rates by 50 basis points to 1.75%. This is the steepest single rise by the Bank since 1995. Incidentally, interest rates in England have risen from 0.1% in December 21 to 1.75% in August 22. 

The way Central banks are worried about inflation and are raising interest rates, clearly shows the global concern. Its not a factor affecting one or the other country but global. The never-ending Russia-Ukraine war which is already 165 days old is not helping matters. The good part is that grains shipment has begun from Ukraine and it would help to bring down food inflation. Further, and if nothing else the speculation about wheat or grain being available from the food belt of Ukraine and Russia would be set at rest with such movement.

The GST collection for the month of July was robust at 1.49 lac crs. This clearly sets the expected collection from GST at 18 lac crs for the current financial year 2022-23. While the number has been around 1.41 lac crs in the earlier part of the financial year, this is set to rise as the festive season starts in a couple of months and the impact of the rise in GST rates also starts generating higher collections. 

The week ahead has a trading holiday on Tuesday and this would affect the momentum in the markets. Expect for all practical purposes the market to start trading from Wednesday onwards as people would like to stay light at end of Monday with global markets open on Tuesday. 

Markets have had a smart rise over the last three weeks and have done reasonably well for themselves from the lows made in June 22. The overall rise has been smart, at times vicious where bears were badly trapped and markets gained in about seven weeks around 14.5%. While some sort of consolidation is more than overdue, it may be round the corner or delayed to happen after one more upward thrust. In any case with a strong rally of about 15% in about seven weeks the correction or consolidation would also be volatile and sharp.

Results season would end for the quarter April to June by the end of the week ahead. Post the week ahead, markets would reflect on the quarter gone by and look ahead to the coming quarters. Central banks have raised rates across countries signalling the rising inflation on account of food and energy. While crude oil has softened, it needs to still go down. 

Expect markets to play in a broad range in the coming days. This would be in the region of 59,600 on the upper side and 57,200 on the lower side on BSESENSEX. In case of NIFTY, it would be 17,800 and 17,000 respectively. Use rallies to sell and sharp dips to buy in the week ahead. It would be the period where the large cap continues to dominate the markets.