Markets were under pressure last week and gave early warning signals on Monday, the first day of the week itself. BSESENSEX lost 484.33 points or 0.79% to close at 60,821.62 points, while NIFTY lost 223.65 points or 1.22% to close at 18,114.90 points. The broader indices saw BSE100, BSE200 and BSE500 lose 1.80%, 2.00% and 2.34% respectively. BSEMIDCAP and BSESMALLCAP were under tremendous pressure and lost significantly more losing 4.24% and 5.21% respectively. The top sectoral gainer was BSEBANKEX which gained 3.01% while the top loser was BSEFMCG which was down 6.08%. Benchmark indices saw BSESENSEX and NIFTY make new lifetime highs on closing basis on Monday and intraday highs on Tuesday before correcting over the week. These were 61,765.59 points and 62,245.43 points on BSESENSEX and 18,477.05 points and 18,604.51 points on NIFTY. For any new uptrend to begin, these levels become the first target to be overcome.

The India Rupee gained 37 paisa or 0.49% to close at Rs 74.89 to the US Dollar. Dow Jones hit a new lifetime high on intraday and closing basis as well. The lifetime intraday high was 35,765 points. During the week, Dow Jones gained 382.26 points or 1.08% to close at 35,677.02 points, which is a new closing high.

Coming to our markets during the week gone by, they gained on Monday but lost on the remaining four days of the week. Even though they gained on Monday, they gave early warning signals of the impending correction when the close on Monday was lower than the open. Secondly even on a day when markets gained, the number of stocks that advanced were lower than the number of stocks which declined. This negative advance decline ratio is a very important tool in technical analysis and is a sure shot advance indicator of events to unfold.

In the coming days we saw the bears claw back into the markets with guerrilla warfare tactics where they attacked individual stocks which had become momentum play and hammered them down substantially. This broke the back of many investors and also ensured that the sentiment turned from euphoria to one of caution. This was reflected in the weak sentiment which remained at the end of the week. Some of the stocks which were hammered included IRCTC, IEX and Tata Motors to name a handful. This also resulted in the midcap and Smallcap indices losing significantly more than the benchmark BSESENSEX and NIFTY stocks.

In significant announcements during the week, the one from RBI in reference to HNI funding by NBFC’s post 1st April 2022 is the most significant and relevant announcement. RBI in January 2021 had circulated a white paper which proposed that the maximum leverage or funding to be given to an individual for application in primary issues would be limited to Rs 1 crore. This has been notified with effect from 1st April 2022 and would have far reaching implications for how primary market issues take place post this date. Currently one hears of the HNI portion being oversubscribed over 300-500 times and that HNI’s leverage their funds 100 times. This means that with Rs 1 cr of their own funds, they could make an application for Rs 100 crs. Now they can make an application for just that amount of Rs 1 cr being added to their own funds. This would bring down subscription levels significantly in the HNI category. The direct result or impact of this would be that the factoring of interest cost or funding cost in the grey market premium would disappear and effectively make valuations of IPO bound companies closer to reality or fair value.

This would be akin to you having a milkshake without the froth or having a smoothie which has no froth. Added to this is the directive from SEBI which has split the IPO bucket of HNI into two categories and would impact share oversubscription. With over 60 primary issues in the pipeline, expect many more to join the bandwagon and time to hit the market before the deadline of 1st April kicks in for new HNI funding rules.

Results season continues with the larger companies from the benchmark indices declaring results which are good and on expected results. We have not had any major unpleasant surprises except the one from Hindustan Unilever where there are rising costs impacting bottom line.

The week ahead sees a number of IPO bound companies hitting the market with their road shows. Prominent among them would be the fashion maker portal or platform ‘Nykaa’. This would be followed by issues from Policy Bazaar, Fino Payments Bank, Popular Vehicles and SJS Enterprises Limited over the next fortnight. This time with Diwali a mere eight trading sessions away, we are likely to see issues opening before Diwali and closing post Diwali, straddling into two weeks with a four-day holiday in between.

On the vaccination front, India has crossed an important milestone with one hundred crore jabs having been given. This number has since crossed to 102.31 cr vaccinations with 71.81 cr being first dose and 30.50 cr being fully vaccinated. Festival season is coming up and so is larger scale opening up of the covid restrictions. We all need to be extra cautious and follow rules strictly so that the dreaded third wave may be avoided.

The week ahead sees October futures expire on 28th of October. The current value of NIFTY at 18,114.90 points is higher by 496.75 points or 2.82% for the series. While this is a low number compared to the gains made in recent months, the battle is far from over. Bulls and Bears would contest fiercely in the coming days to show their supremacy. Looking at the fall in the last week, it would be fair to assume that there would be some corrective rally in the coming week. Whether the rally has the strength to increase momentum and make new highs looks difficult in the upcoming week as of now. Post the week ahead, readers should be aware that the week 1st November to 3rd November is a mere three-day week followed by Muhurat trading and Diwali holiday. With a mere three-day trading, markets tend to remain less volatile and traders prefer to keep positions light.

Focus in the week ahead would continue to remain stock specific rather than sector specific and the strategy should be to buy into the dips which have happened and sell when markets rally. Friday action in railway stocks such as IRFC, Ircon and RVNL would be keenly watched as they have made huge gains and follow up action would be keenly awaited. Further in the week gone by, FPI’s and DII’s have been big sellers in the cash market and sold on a net basis more than 11-12K crs. This has increased the floating paper in the market which would see further increase with the large number of IPO’s coming.

Expect volatility, some rebound in the early part of the week and sharp movements on expiry day. Trade cautiously.

Markets were on a roll and continued to gain strongly in the four-day week which ended on Thursday. BSESENSEX gained 1,246.89 points or 2.08% to close at 61,305.95 points while NIFTY gained 443.35 points or 2.48% to close at 18,338.55 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.74%,2.69% and 2.65% respectively. BSEMIDCAP gained 3.34% while BSESMALLCAP was up 1.92%. In sectoral indices, BSEPOWER was up 6.82% while BSEIT lost 1.98%. In individual stocks, the top gainer was Tata Motors which gained Rs 114.50 or 29.90% to close at Rs 497.45. Tata motors has moved from Rs 275 on 23rd August to Rs 497.45 on 14th October, a gain of Rs 222.45 or 81% in just about 7 weeks.

The Indian Rupee was under pressure and lost 28 paisa or 0.37% to close at Rs 75.26 to the US Dollar. Dow Jones gained over 900 points in the last two trading sessions and hence managed to end the week with gains of 548.51 points or 1.58% at 34,746.25 points.

In corporate news, the Zee Invesco saga took a new turn with the present MD and CEO the stock exchanges about the largest investor, Invesco proposing a merger with a strategic group in February 2021. This proposal involved the same set of conditions which Sony has proposed in the merger announced by them. This disclosure raises a new set of issues and the ball now rests in the court of Invesco who has to explain whether he is guilty of insider information and whether he was playing the role of an investor of investment banker. Further why the conditions proposed in February and now in September being not different in any way, does he have objections. This issue has become murky and would need mediation as to rights, duties and obligations of a large investor. In the meanwhile, the share would continue to remain in the limelight and await clarity from the matters which are pending with NCLT and the Mumbai High Court.

After a prolonged dispute involving SAT and SEBI, the board of PNB Housing has decided to cancel the proposed preferential issue of shares and warrants to its largest investor and explore alternative fund proposals. The company’s decision was felt as unfair as it diluted the minority shareholders interests.

In primary market news, the offer for sale from Aditya Birla Sunlife AMC Limited who had issued shares at Rs 712 listed on the bourses. The share had a lacklustre listing and closed day one at Rs 699.65, a loss of Rs 12.35 or 1.73%. During the week, the share lost further ground to touch a low of Rs 671.80, but recovered ground on Thursday to close at Rs 696.55 down 2.17%.

In other primary market news, a number of issues have received SEBI nod and go ahead for their offerings. In the week ahead they need to hold their roadshow and tap the markets in the week 25th to 29th October. In case this opportunity is lost, then the earliest we could see issues is post Diwali. Keep our fingers crossed for what issues do tap the market.

Results were declared by Infosys, Wipro and HDFC Bank amongst the heavyweight stocks. D Mart also declared results and the sample of companies declaring results, indicates that things have certainly turned around. This would give further confidence for the companies which are yet to declare results in the coming weeks.

On the vaccination front, the number of vaccinations in the country have crossed the 97.61 cr mark. This number includes both the first and second vaccination.

Markets are in a very strong grip of the bulls. On the positive side we have better results, global markets moving up and liquidity which seems never ending driving the markets. The number of demat accounts have moved up very sharply and crossed the 7 cr mark. For record purposes this number was at a mere 4.02 cr mark as of February 2020. The power of the retail investor and HNI’s in the country is at times understated and undervalued. This segment is also contributing to the demand for shares in the markets.

The state of the market currently is euphoric and in complete control of bulls. Almost every other day if not every day, new lifetime highs on an intraday basis as well as closing basis are being made. Incidentally the last day of the week on Thursday was such a day. Every person keeps on repeating that every dip is an opportunity to buy and that investors must buy and hold shares. While the sentiment summarises the state of the market, it does not necessarily reflect on the state of the economy or ground reality. We are passing through tough times and there is a large element of overheated exuberance in the market currently. What could happen is a correction of anything between 10-15% which could lead to greater sanity. While this would be welcome, any such action could lead to a large number of new investors losing a significant portion of their wealth.

The strategy would be to continue to book profits at every available opportunity and have some percentage of cash on hand for a rainy day. While we may not have had a rainy day in the last week, such opportunities are available as markets have a sector rotation which keeps on recurring.

Use sharp rallies to book profits and sharp dips to buy. It is imperative to have some amount of cash available to take advantage of opportunities. Be patient as trading opportunities will be available.