It was a truncated week with four trading sessions. Markets gained on two of the four sessions and lost on two. While indices appeared to have ended flattish with a negative bias, the volatility was huge. BSESENSEX lost 207.43 points or 0.28% to close at 75,157.26 points while NIFTY lost 75.90 points or 0.33% to close at 22,828.55 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.24%, 0.28% and 0.23% respectively. BSEMIDCAP was down 0.58% while BSESMALLCAP was down 0.15%. The intraweek lows made on Monday and highs made on Friday were at 71,425 points and 75,467 on BSESENSEX while they were at 21,743 and 22,923 on NIFTY. Effectively we were all over the place and closed marginally negative in the four-day week. 

The Indian Rupee was volatile and lost 82 paisa or 0.96% to close at Rs 86.05 to the US Dollar. Dow Jones was volatile like a roller coaster. The intra-week low was at 36,611 points while the high was at 40,778 points. Dow gained 1,897.85 points or 4.95% to close at 40,212.71 points. Dow gained on two of the five trading sessions and lost on three. 

RBI in its first bi-monthly policy review meeting, unanimously cut Repo rate by 25 basis points to 6%. This is the second consecutive rate cut affected by RBI. It also moved the stance to ‘accommodative’.

The entire action globally was focused on one man and one event. Donald Trump and his reciprocal tariff war with 75 countries. The tariff war with China seemed to be reserved for the finale. It began with 34% and this was over the 20% base rate set right at the beginning. It was then raised by an additional 50%. Then the same was raised by another 41% to make a total of 145%. China kept pace and had a tariff which was 20% lower. The drama did not end yet as there were rumors on Tuesday that tariffs were kept on hold for 90 days. This saw Dow go on a wild trip and ultimately when nothing came out, it closed with losses. The announcement of keeping tariffs other than the 10% and what was announced on autos and metals remained in force with immediate effect post announcement on Wednesday. China had special tariffs at the 145% level. 

Tariffs have now become a daily warfare and one can expect changes at the drop of a hat. As it is the pharma sector is still waiting as to what would happen. I believe it is best to leave Trump and tariffs aside and carry on with the markets.  The ground reality is quite scary. US has a trade deficit of 1.2T Dollars on an import of 3.26 T dollars and export of 2.06 T dollars. Of this the trade deficit with China is 296 billion dollars. 

Results season has begun with TCS announcing results which were in no man’s land, being neither good or bad. This would set pressure on other IT results to be declared as people would be waiting for cues from others. It now is up to the rest of the pack to deliver results going forward. 

India is in a sweet spot as tariffs are concerned and would be able to negotiate a favorable deal. However, till the deal is concluded this would be a hindrance to the smooth functioning of the markets. To make money in the markets, one would have to look beyond tariffs and not get bogged down with the same. 

Coming to the markets in the week ahead which has a truncated three day week with holidays on Monday and Friday, expect markets to remain volatile. The after effects of tariff seem to be subsidizing until new bombs explode. It appears the fall in NIFTY to 21,743 is more or less a bottom for the time being. The rebound was swift on expected lines. Markets would look for directions on the tariff front in the 90 day window set by Trump. For the short week ahead and short term, support exists at levels of 22,500 and lower at levels of 22,100 points on NIFTY. On the resistance side, the immediate level is 22,950 and higher up at 23,450-500 points. Similar levels on BSESENSEX would be at 74,200 points and 73,000 points while resistance would be at 75,550 points and higher up at 77,050-77,200 points.  

The strategy would be to concentrate on large cap stocks as they would offer safety and with the correction that has happened scope for upside in the medium term. 

Trade cautiously.

It was a dramatic, eventful and action packed four-day week that went by. Donald Trump announced the ‘reciprocal’ tariffs on the entire world. Interestingly, we lost more based on last Friday’s US markets than what happened on Thursday night this week in the US. Reciprocal very quickly turned to retaliatory and would now again hopefully quickly move to negotiation. While China has responded with the same tariff as US has imposed, Vietnam is willing to negotiate. What is happening globally is nothing short of bizarre. BSESENSEX lost 2,050.23 points or 2.65% to close at 75,364.69 points while NIFTY lost 614.90 points or 2.61% to close at 22,904.45 points. The broader markets saw BSE100, BSE200 and BSE500 lose 2.56%, 2.55% and 2.50% respectively. BSEMIDCAP lost 2.46% while BSESMALLCAP was down 1.65%. Markets gained on one of the four trading sessions and lost on three.

The Indian Rupee gained 24 paisa or 0.28% to close at Rs 85.23 to the US Dollar. Dow Jones lost on three of the five trading sessions and gained on two. It was down 3,269.04 points or 7.86% to close at 38,314.86 points. In the process of the sharp two day fall this week, various indices in the US have entered either the bear phase or the correction stage. The kind of weekly fall witnessed can be compared with what happened during the outbreak of the Wuhan pandemic in March 2020.

Closer home, Delhivery has bought IPO bound Ecom Express at a valuation of Rs 1,407 crores. While the IPO was for a much higher value it clearly seems a fire sale. Whether Delhivery would gain from this acquisition or not only time will tell. One thing is certain, that loss making Delhivery will at least be able to show revenue numbers, something to talk about going forward. Currently both Delhivery and Ecom Express are loss making. The IPO was to raise Rs 2,600 crores and the company was last valued at Rs 7,300 crores about a year ago. How perception changes!!!

Merchant bankers are using the media to whip up sentiments that in large issues, the Retail portion should be reduced from the 35% at present to something lower. They cite the example of recently listed Hyundai and some other issues. to put forward their point. Ever since the outbreak of covid, the number of new investors to have joined the markets has multiplied manifold. The number which was below 4 crores, has now almost touched 20 crores. Secondly, one is finding that these investors are not coming from the traditional Mumbai and Gujarat belt but from almost all over the country. 

Merchant bankers fail to admit that the issue price of Hyundai was over board and considering that the company would have no growth for the next 18-24 months considering their lack of capacity, they should have priced the issue fairly and not so aggressively. Other than the day that the share listed on 22nd October 2024, the share has failed to trade at even par or above issue price. This clearly shows that the management with advice from merchant bankers got their math’s wrong. They now passing the buck on poor response from retail is adding insult to injury. SEBI should politely but firmly tell merchant bankers to not even tinker with the allocation system in any manner whatsoever. 

The fact that we have had no issue in roughly 45 days now, shows the poor confidence that merchant bankers and promoters have on their own offerings. They still do not want to look at realty as far as valuations are concerned. 

Coming to the important point of tariffs, Donald Trump initially spared the pharma space from the same on Thursday and one saw the sector rallying smartly on Thursday. He then had a rethink and said there would be a relook at the pharma sector also and they fell on Friday. IT, pharma and metals bore the brunt of the selling on Friday. 

Coming to markets and what to expect. The March madness rally saw NIFTY gaining from 21,964.60 points to 23,869.60 points, all in 14 trading sessions. The gain a mind blowing 1,900 points. In the next seven sessions we have fallen to a low of 22,857.45 points, a fall of 1,000 points. Similar numbers on the BSESENSEX were from 72,633.54 points to 78,741.69 points, a gain of 6,100 points. The fall to 75,240.55 points, a fall of 3,400 points and just about half the time i.e., seven days have been consumed. GIFT NIFTY is trading substantially low and we could have a sharp meltdown on Monday, to say the least. What is really worrisome is that negotiation only happens when your opponent speaks. At this point of time the various countries except China who has slapped a tariff and Vietnam which is willing to negotiate, all other countries are holding their cards close to their chest. The next week will hopefully see some clarity emerging. 

The week ahead has a trading holiday on Thursday which would put pressure on Wednesday as global markets would be open the following day. In such tumultuous times it makes sense to close Wednesday with little or no open positions as world would change dramatically. After a long time we saw equities, crude, gold, silver and metals all lose. To add to the same the dollar index too weekended. Very clearly tough times and unheard-of things happening. 

Arbitrage between duties would be the next thing to look at and one should not get surprised if the Dragon looks for investing in India to set up facilities where there is such an advantage. India would have a tough time deciding what to allow and what not to. 

Support exists at levels of 22,450-22,500 points which is likely to be broken when markets open as Gift Nifty suggests a loss of over 700 points at opening. Following this support exists at the lows made on 4th March of 21,964.60 on NIFTY and at 72,633.54 points. If these levels are also broken, we would have to find new levels. No resistances are being given as they are irrelevant for the week ahead. One could find that the FPI selling in the coming days is likely to ease off as they start finding value in Indian markets at valuations. Secondly, the fact that US may no longer be the go to market with issues like inflation, growth and uncertainty, it makes sense to stick to tried and tested markets. 

The strategy would be to refrain from jumping the gun and allow markets to settle. It should happen in the next seven days and world settles to new tariffs. 

Trade cautiously.