The week gone by saw markets gain on the first two days of the week and then lose on the remaining three days. The selling pressure was quite a bit and the losses at the end of the week were substantial. BSESENSEX lost 741.87 points or 1.26% to close at 58,098.92 points while NIFTY lost 203.50 points or 1.16% to close at 17,327.35 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.21%, 1.25% and 1.23% respectively. BSEMIDCAP lost 1.12% and BSESMALLCAP lost 1.23%. The midcap and Smallcap sectors saw sharp selling and value erosion on Friday which are not reflective of what the index lost. 

The Indian Rupee was under pressure along with the global currencies after the FED had raised interest rates. The rupee lost a massive Rs 1.25 or 1.57% to close at Rs 80.99 to the US Dollar. Dow Jones hit a new 52 week low at 29,250 points. Dow lost 1,232.01 points or 4% to close at 29,590.41 points. Dow gained on just the first day of the week and lost on the remaining four days. 

FED raised interest rates by 75 basis points on expected lines. The new rate band is now 3.00-3.25% and the FED is on track to have an interest rate of around 4.4% by the end of calendar year 2022. There would be two more meetings in November and December. The impact of this rate hike would be felt on credit card debt, automobile loans, mortgages and variable rate loans. Very clearly this would hit the common American as they typically live on credit card spends and EMI’s. 

There are no primary issues in the week ahead. We are probably going to see some action from the first week of October onwards. Shares of highly subscribed Harsha Engineers International would be listed on the bourses on Monday the 26th of September. The issue was subscribed a massive 74.7 times. This is a record under the new guidelines effective from 1st September where ASBA or blocking of funds is to be done on the same day. This was to prevent the large scale of applications being returned as their funds would not be blocked. 

This brings us to an interesting observation and action point by SEBI. With blocking of funds happening within the bidding period, there is no reason for shares to list on the sixth working day after closure of the issue. It should certainly happen by the fourth day and thus save two days in the cycle. This would reduce price manipulation post closure of issue and also help in reigning in rampant speculation. Hope SEBI in its next meeting slated for the September month end does take up this point for consideration. 

The week ahead sees RBI meet for its monetary policy meeting between the 28th to 30th of September. A rate hike is imminent but the jury on how much is not yet clear. Considering the fact that every Central Bank across the globe who has met has raised interest rates, expect RBI to do so in the range of 40-50 basis points. 

Thursday the 29th of September sees September futures expire. It has been a choppy month and the high of the series was made a week ago at 18,096 points while the low was made last Friday at 17,291 points. At the current level of 17,327 points, the series is down by 195.10 points or 1.11%. Another way of looking at the series is that the losses of last week is what the series is down by, as prior to last week it was quits on the series. Expect markets to remain choppy and volatile as the series ends in the next four days. 

Coming to the markets in the week ahead, there would be nervousness and high volatility. Dow having hit a new low, RBI policy meet and imminent rate hike would act as a dampener for markets. In terms of support, immediate support exists at 17,150-17,200 on NIFTY and 57,600-57,750 on BSESENSEX. If this is violated, we have the next level of support at 17,000 and 57,150 points respectively. Resistance exists at the levels of 17,650-17,700 and 59,100-59,250 points. The previous week’s top was the strongest resistance at 18,100 and 60,676-60,700 points. With the quarter coming to an end this week, expect people to start talking about results next week onwards. 

The strategy for the week ahead which has expiry and RBI meet would be to refrain from carrying forward positions at end of day. After consecutive sharp losses in the DOW over the last two weeks, people would look for a bounce there. In case that happens, even our markets would have a rub off effect. While FPI have been sellers over the last three sessions, they have by and large remained neutral in September with net sales of Rs 2,445 crs in the month so far. Sell on sharp rallies and accumulate on dips. The risk to reward ratio would be in favour of buying on sharp dips.

Markets in the week gone by had a torrid time and one heard people talking of the fact that we had de-coupled with US Markets one more time. Fortunately, this talk of decoupling lasted a mere 24 hours and it disappeared as quickly as it had begun. BSESENSEX lost 952.39 points or 1.59% to close at 58,840.79 points while NIFTY lost 302.50 points or 1.70% to close at 17,530.85 points. The broader markets saw BSE100, BSE200 and BSE500 lose 1.48%, 1.44% and 1.41% respectively. BSEMIDCAP lost 1.46% while BSESMALLCAP lost 1.12%. Benchmark indices lost on three of the five sessions and gained on two of them.
The Indian Rupee gained 6 paisa or 0.08% to close at Rs 79.74 to the US Dollar. Dow Jones lost 1,329.29 points or 4.13% to close at 30,822.42 points. It lost on three of the five trading sessions and gained on two trading days.
In primary market news, shares of Tamilnad Mercantile Bank Limited listed on the exchanges in the trade-to-trade category on Thursday the 15th of September. Against an issue price of Rs 510, shares closed listing day at Rs 508.45, a loss of Rs 1.55 or 0.30%. On Friday, they lost significantly more closing at Rs 493.75, down Rs 16.25 or 3.19%.
The issue from Harsha Engineers Limited which had tapped the markets with its fresh issue of Rs 455 crs and an offer for sale of Rs 300 crs, created history for the subscription received. The record was for the subscription under new rules where funding has been capped at Rs 1 cr max per applicant and HNI bucket split into two. The issue was subscribed 74.7 times overall. QIB portion was subscribed 178.26 times, HNI portion subscribed 71.32 times, Retail portion subscribed 17.63 times and Employee portion was subscribed 12.07 times. There were 26.40 lac applications.
Coming to the markets last week with the US markets first. On their (US) Tuesday night, they fell a dramatic 1,276 points on higher-than-expected inflation. Further at this point in the ensuing FED meeting slated for 20-21 September, the consensus for rate hike is 75 basis points with 74% polled believing that the pedal may be pressed further and the same increased to 100 basis points. This triggered the selloff and caused panic in global markets.
Switch to India on Wednesday morning, where we opened a gap down at 59,147.12 points on the BSESENSEX and 17,771.15 on NIFTY. The openings were the lows and from there we recovered everything at one point of time before finally closing at 60,346.97 points and 18,003.75 points respectively. The net loss was a mere 245 points on BSESENSEX and 67 points on NIFTY. Here people were talking about the decoupling effect. Anyway, all of it seemed short lived and incidentally on Friday, the lows broke the Wednesday’s swing low quite comfortably.
Couple of other events that took place and need to be mentioned include the fact that the retail liquidity witnessed over the last couple of weeks saw a setback over the last couple of days trading. Midcaps and small caps which were moving up sharply fell over the two days. Further, money seemed to be drying up or purchases being deferred. Secondly investors wanted to wait for further investment till results for the quarter July to September were declared later on. To add to this is the fact that FPI’s have turned sellers over the last three consecutive days and for the first half of September have invested a net 1,956 crs. Domestic institutions have net sold Rs 3,000 crs for the month.
The week ahead sees the US FED meet on Tuesday-Wednesday for their rate hike meeting. While 75 basis points hike is given, even a 100-basis points hike may not be surprising. What would be keenly watched is the commentary thereafter and what it implies for hikes in the two-remaining meetings over the balance part of the calendar year. Further, over the last couple of occasions, US markets have behaved unexpectedly post the results of the FED meeting.
With FED uncertainty, expect markets to remain choppy and volatile. The highs made last week of 60,676.12 on BSESENSEX and 18,096.15 points on NIFTY, will be key levels which need to be broken upwards and sustained for any upward rally. Failure to do so would bring pressure on the indices in the short to medium term. Assuming markets have the momentum to break and sustain we should see upside movement taking the markets to set up a move past the previous all-time highs in the near future.
On the other hand, we have support at 58,100-200 and at 17,300-350 points on NIFTY. The next level of support which could be said as the last hope for the bulls would be 57,575-650 on BSESENSEX and at 17,125-175 on NIFTY. In case this is violated downwards, we could see the pace of fall increasing. The strategy would be to buy on sharp falls and sell on any strong rallies. Markets will remain in a broad range and trade with volatility. Use the same to make profits.