It was a crucial week with markets extending sharp gains on the first two days of the week. They then corrected and surrendered a large part of the gains, but still ended the week with gains. They gained on three of the five trading sessions. BSESENSEX gained 509.41 points or 0.66% to close at 77,414.92 points while NIFTY gained 168.95 points or 0.72% to close at 23,519.35 points. The broader markets saw BSE100, BSE200 and BSE500 gaining 0.56%, 0.43% and 0.27% respectively. BSEMIDCAP lost 0.72% while BSESMALLCAP lost 1.39%. The movement in the markets has been very swift and it first caught the bears by surprise and then the bulls, where suddenly after a fourteen session rally, it seems like all is over.
The Indian Rupee gained 51 paisa or 0.59% to close at Rs 85.47 to the US Dollar. Dow Jones had a torrid time when there was a broad sell-off on Friday with Dow losing 715 points. For the week, Dow lost 401.45 points or 0.96% to close at 41,583.90 points. Sticky inflation data and a sharp fall in consumer sentiment which lost 12% in February hit markets. To add insult to injury, tariff anxiety is making markets nervous.
March series expired on Thursday the 27th of March on a positive note. The series registered gains of 1,046.90 points or 4.64% to close at 23,591.95 points. This is against the low that NIFTY made of under 22,000 in the first week of March. The rally has been very sharp with 1,900 points being gained in 14 trading sessions.
Primary markets are in hibernation currently. The performance of companies which listed in January and February has not been the best. Of the ten main board issues which listed during January and February, as many as seven are trading below their issue price. This would be a challenge when promoters and merchant bankers launch issues in the future and try to justify their valuations. To revive the market, it would be advisable if valuations are lowered keeping in mind the markets and the poor performance of listed entities in recent times.
The week ahead begins with a trading holiday on Monday and would therefore have four trading sessions. The week would be focused on events leading up to the 2nd of April, when Trump announces tariffs on the whole world. The impact of the sharp fall on Friday in Dow would be fresh on people’s minds when they trade on Monday onwards. The key reasons for the fall were the sticky inflation and sharp drop in consumer sentiment. Worries or anxiety on tariffs are actually haunting the market. The auto imports have become expensive with a 25% tariff.
This would keep markets volatile and choppy when trading resumes on the 1st and would remain tentative on the 2nd as well. Wednesday night is when the final list would be announced. Our markets would therefore react quite sharply when they open for trading on Thursday the 3rd of April.
Our markets have made some support at levels of 23,000 points on NIFTY and levels of 74,600 on BSESENSEX. While these would act as solid support, we have support at higher levels of 23,200 and 75,200 points respectively. Resistance is at the high made last week on Tuesday at levels of 23,800-23,900 and at 78,500-78,800 respectively. The strategy would be to buy with a tight stop loss at the support levels and any trading shorts with stop losses at the resistance levels. As long as markets trade in this band, they will be in no man’s land and would seek direction from events and news flow to react. The upcoming fortnight is flush with events like Trump’s tariffs, RBI’s policy review and of course quarterly and annual results due in next ten days onwards.
The banking sector seems to be the front runner for the time being. ICICI Bank and Kotak Bank seem to be on their own while HDFC Bank is about to hit a new high. Even PSU banks seems to be getting ready to get into their act of rallying. This is likely to be the pillar of the rally in coming times.
Coming to the strategy for the coming week, safety lies in the large cap stocks. While midcap and small cap did rally, they seem to have fizzled out quite fast. Probably the sustainability would be tested post results declaration and on showing growth, so that valuations look cheaper. In such a scenario, with markets not yet put of the woods, safety should be of primary concern and preservation of capital should be the first objective.
Wait for clarity on 3rd morning before taking any positions and till then concentrate on large cap stocks.
Trade cautiously.
