The first week of the new calendar year 2022, saw markets in India open with a bang. FII’s who were big sellers in the last couple of months, stopped selling and actually made net purchases. This changed the sentiment and at the end of the third day of the week, things looked hunky dory. Thursday saw a correction and even though Friday saw markets gain, it was small compared to what we saw in the earlier part of the week. At close, BSESENSEX had gained 1,490.83 points or 2.56% to close at 59,744.65 points while NIFTY gained 2.64% or 458.65 points to close at 17,812.70 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.65%, 2.45% and 2.37% respectively. BSEMIDCAP gained 2.01% while BSESMALLCAP was up 1.95%.

The Indian Rupee gained three paisa or 0.04% to close at Rs 74.30 to the US Dollar. Dow Jones hit a new life time high of 36,953 points and a new closing high of 36,799.65 points during the week. It however closed with a small loss of 106.64 points or 0.29% for the week at 36,231.66 points. The fall came post the minutes of the recent US Fed meeting being made public, where it appears imminent that a rate hike is round the corner. This caused markets to correct and NASDAQ saw an even deeper correction. The much debated and controversial crypto currencies took yet another beating across the board.

In political news in India, the Election commission has announced one day poll in four states of Uttarakhand, Goa, Manipur and Punjab. There would be a seven-phase poll in Uttar Pradesh. The elections would begin from the 10th of February and counting would take place on 10th of March.

Results season for the third quarter, October to December 2021 will kick in with full earnest in the coming week. January 12th will see three IT companies declaring their results. They are TCS, Wipro and Infosys with TCS also announcing terms of its fourth buyback along with its quarterly results. While results season keeps the markets busy and volatile, it also ensures that sector rotation keeps on constantly happening.

In primary markets news, no new primary issues have been announced for the calendar year so far. While there are many waiting on the side-lines, any announcements are still waited. The mega issue from LIC is likely to see the company file its DRHP in the coming week. The issue would see the first ever reservation for policy holders and would in all probability entail a small discount as is known for retail investors and the new policy holders category. The market would be following this issue closely as reports value the company around the 10 lac cr market capitalisation level.

In terms of newly listed shares since 18th November, 6 out of the 17 listings are trading at a discount as of Friday.

The rapid rise in covid-19 affected people has taken its toll on the stock markets. While the number of affected people has risen rapidly, it has not led to people being hospitalised or resulting in deaths. Not being a medical expert, it would suffice to say that in all probability this is a milder variant but more of a spreader, affecting significantly larger populations. The number of affected people has increased globally and we saw more than 2 million cases in the last couple of days. Further, the number of active cases globally has risen very rapidly and is currently at 41.57 million cases with 17.87 million cases in the US alone. In India this number is at a mere 0.59 million cases.

Coming to the markets in the week ahead, it would be a week of consolidation with a positive bias. BSESENSEX would trade in a range of 700 points plus/minus from the present levels of 59,744 points while NIFTY would trade in a range of 250 points plus/minus from the present range of 17,812 points. The present strategy of buying on dips and selling on rallies should continue. With the market breadth increasing substantially, it may make sense to include some midcap and Smallcap stocks where they are expected to perform well in the coming quarterly results. Refrain from getting carried away by the momentum stocks.

The last week of calendar year 2021 ended on a high with stock markets registering gains and gaining ground to end the year with flying colours. BSESENSEX gained 1,129.51 points or 1.98% to close at 58,253.82 points while NIFTY gained 350.30 points or 2.06% to end at 17,354.05 points. The broader indices saw BSE100, BSE200 and BSE500 gain 1.97%, 2.12% and 2.26%. BSEMIDCAP gained 2.52% while BSESMALLCAP was up 3.85%.

The Indian Rupee recovered ground and gained 69 paisa or 0.92% to close at Rs 74.33 to the US Dollar. Dow Jones gained 387.74 points or 1.08% to close at 36,338.30 points. During the week it hit a new lifetime high on intraday basis of 36,679 points and on closing basis of 36,488.63 points. For the year Dow Jones gained 5,731.82 points or 18.73% to close the calendar year at 36,338.30 points.

If one looks at the performance of Indian benchmark indices in calendar year 2021, they were better than the Dow and outperformed it. BSESENSEX gained 10,502.49 points or 21.99% to close at 58,253.82 points. NIFTY gained 3,372.30 points or 24.12% to close at 17,354.05 points. Bank Nifty was comparatively an underperformer and gained 4,217.65 points or 13.49% to close at 35,481.7 points. BSEMIDCAP gained 7,028.65 points or 39.18% to close at 24,970.08 points. BSESMALLCAP was the outperformer gaining 11,359.65 points or 62.77% to close at 29,457.79 points.

December futures expired on Thursday the 30th of December and it was one of the quietest expiries witnessed in a very long time. The net change for the day was a mere 10 points and the range between the high and low of the day was 118 points. The series expired with losses of 332.30 points or 1.89% at 17,203.95 points.

In primary market news, there were three listings which took place last week. The first was H P Adhesive Limited which had issued shares at Rs 274 and listed on Monday. The share closed at Rs 334.95, a gain of Rs 60.95 or 22.24%. By the end of the week the share had gained further closing at Rs 407, a gain of Rs 133 or 48.54%.

The second share to list was on Tuesday from Supriya Lifescience Limited. Shares were issued at Rs 274 and ended listing day at Rs 390.35, a gain of Rs 116.35 or 42.46%. By weekend, shares had gained further to close at Rs 483.50, a gain of Rs 199.50 or 76.46%.

The third and final issue to list was from CMS Info System Limited which listed on the last trading day of the calendar year. The company had allotted shares at Rs 216 saw its shares close day one at Rs 237.40, a gain of Rs 21.40 or 9.91%.

The primary market has been on a roll in calendar year 2019 and over 1.19 lac crs have been raised through some 68 issues. Seeing the spurt in fund raise, SEBI has introduced some changes in the same at its recent board meeting.

Primary amongst the changes is the restriction in the amount that can be raised for undisclosed acquisitions and general corporate purposes. The new rule states that the amount as a percentage of the fund raise cannot collectively exceed 35% under both heads combined (acquisitions and general corporate purposes) and 25% for acquisitions as a standalone unless details are given.

Secondly the price band has been specified at a minimum of 105% of the price stated. This means that the minimum price band would be 5%. For example, if the price stipulated is Rs 500, then the price band would be Rs 500-525 at the bare minimum.

Thirdly, the anchor allocation would include half the portion to be locked in for 30 days and the balance for 90 days. Fourthly, there are restrictions on the number of shares that can be sold through an offer for sale by investors. In case the holding individually or collectively is more than 50%, they can sell no more than 20% of the shares. If, however there shareholding is less than 20%, they can sell only 10% of their holding.

These measures have been introduced seeing many of the recent tech platform companies which have not followed these guidelines if they had been already introduced. This would help the market see issues more realistic in price and have objects which are more specific in nature rather than being generic.

In term of newly listed shares, of the 20 that have listed since 15th November, 8 are trading below their issue price while of the 9 that have listed since 17th December, 3 are trading below the issue price. Clearly the pressure is telling on the listings and also speaks of the quality and pricing greed of promoters, P E Investors and merchant bankers collectively.

The new mutant, ‘Omicron’ is keeping people on their toes globally as the number of affected people seems to be rising quite sharply. While fatalities or people being hospitalised has not seen any significant rise, the number of affected people has risen quite sharply. In India, many states have launched precautionary restrictions including night curfews. Its time to be cautious and prevent a third wave in the country. In terms of vaccinations, a total of 145.52 cr vaccinations have been given of which 84.73 cr is the first dose and 60.79 cr are fully vaccinated.

Coming to the markets, the rally over the last fortnight has set the markets in a very interesting scenario. The trading range is roughly 200 points below the present level of NIFTY and about 150 points higher than the present level. As long as these levels are not violated, markets would remain range bound. If, however the range is violated, markets would breakout or breakdown and gain sharp volatility in the direction of the movement.

What would determine this movement is whether FII’s continue their selling mode or the new year sees a change. Secondly how ‘Omicron’ reacts going forward could be an important factor. Thirdly, the movement of Dow after making a new lifetime high last week is looking vulnerable. If Dow goes into a corrective mode, global markets would follow suit.

The strategy in the coming week would be to take advantage of any large swings that may happen with selling on rallies and buying on dips. While the breadth of the market has improved last week, it may have a lot to do with NAV of mutual funds. Whether this breadth of expansion continues, only time will tell. With budget due on 1st of February there is every possibility of a pre-budget rally kicking in. Keep your eyes and ears on the market to spot this as and when it happens. Finally, the IPO market would again begin its role with issues gearing up for the small window, pre-budget launch. Let us see how many brave hearts actually make it this time around.