After a gruelling seven phase poll which ended yesterday, the exit polls have given the ruling NDA a comfortable majority in the results to be announced on Thursday the 23rd of May. They are expected to cross the 300 mark in a house of 542 members. This will ensure a huge gap up movement in the morning when markets open and they will remain at these higher levels till results are announced. If they are by and large in line with the exit polls the rally will further strengthen with the same becoming widespread and larger number of stocks participating. If they are completely wrong, there could be a sharp selloff leading to mayhem.

Markets were super volatile all through the week. Monday saw the markets begin on a neutral note and it appeared that the anticipated reversal after eight straight days of losses would happen, but then someone hit the futures with a large sell order and markets cracked. Probably the seller had inclination that China would retaliate on the US imposing higher duties on 200 billion dollars of US imports. China did retaliate that night by imposing duties of 20 and 25% on 60 billion dollars of US exports to China. Markets rose on Tuesday instead and the reversal did happen.

BSESENSEX gained 467.78 points or 1.25% to close at 37,930.77 points while NIFTY rose 128.25 points or 1.14% to close at 11,407.15 points. The low of the week was 36,956.10 points while it was 11,108.30 on the NIFTY. This effectively means that the BSESENSEX rose almost 1,000 points from the low while NIFTY rose 300 points. The broader indices saw BSE100, BSE200 and BSE500 gain 0.90%, 0.66% and 0.46% respectively. BSEMIDCAP was down 0.57% while BSESMALLCAP was down 1.55%. Markets gained on three of the five trading days while they lost on two days.

The rally on Friday was very strong and the BSESENSEX gained 537 points while NIFTY gained 150 points. If one were to look at it in another way the markets were negative on a weekly basis at Thursday end and became positive only with Friday’s rally. Looking at the magnitude of the rally one is tempted to believe that people were aware of the outcome of exit poll after six phases and that led to this strong rally on Friday.

Dow Jones was down 178.37 points or 0.69% to close at 25.764 points. The Indian Rupee too was under pressure and lost 31 paisa or 0.44% to close at Rs 70.22 to the US dollar.

Healthcare sector or the pharma sector was under severe pressure with any pharma companies declining around 10% after news of a suit being filed by 44 US States against 20 companies which named seven Indian companies as well. These companies are Wockhardt, Glenmark, Dr Reddy’s, Aurobindo, Lupin, Zydus and Taro which is a subsidiary of Sun Pharma.

Tata Global Beverages and Tata Chemicals have agreed to demerge the consumer division of Tata Chemicals and merge the same with Tata Global Beverages. This should be positive for both the companies. Shares of Tata Global Beverages were up sharply gaining Rs 36.85 or 18.57% to close at Rs 235.30, while Tata Chemicals gained Rs 28.80 or 4.88% at Rs 619.10.

Markets will open gap up on Monday and there is not much one can do. Avoid trading as markets may not offer intra day volatility in the first three days.

It was a bad week at the markets and they lost ground on all five trading sessions. The bulk of the losses were in the first three days and the pace of fall reduced thereafter. It certainly gave indications that after eight straight days of losses, there could be a bounce when they begin trading on Monday.

BSESENSEX was down 1,500.27 points or 3.85% at 37,462.99 points while NIFTY lost 433.35 points or 3.70% to close at 11,278.90 points. The broader indices like BSE100, BSE200 and BSE500 lost 3.61%, 3.56% and 3.49% respectively.

It was a after a very long time that I saw three heavyweights which happened to be from completely different sectors lose over 11% each in a week. The stocks were Tata Motors down 11.22%, Reliance Industries 11.09% and Tata Steel 11.01%. It indeed gives a fair picture of what happened. There were no sectoral gainers either and BSEIT was the so called best as it lost the least at -1.01%.

Dow Jones too was under pressure and lost 567.58 points or 2.12% to close at 25,942.37 points. Dow rose on Friday and gained 114 points or 0.44%.

Coming to the correction, which in eight trading sessions has wiped out almost 50% of the gains made over two months, it seems to be done. The rally began from 19th February which saw BSESENSEX make a low of 35,287.16 points. From there it rose 4,200.29 points to make a lifetime high of 39,487.45 points on 18th April 2019. From there after remaining sideways for some time, the fall began on 30th The 50% correction to this rise would be at 37,388 and we are currently about 75 points higher. In intra-day trade the low was 37,370 points which means the level was reached. Similarly, on NIFTY the rally began at 10,585.65 points, gained 1,270.50 points to touch 11.856.15 points. The 50% fall would be to 11,221.26 while the intra-day low on Friday was 11,251.05. The closing was 11,278.90 points and if these levels hold, could coincide with the correction.

points. Dow rose on Friday and gained 114 points or 0.44%.

What led to this correction is more significant. The first is that we had rallied quite strongly in two months without a correction. Secondly, there were reservations on whether the ruling BJP/NDA may or may not be able to form the next government. Thirdly, President Trump imposed duties of 25% against 10% on 200 billion dollars of Chinese imports with effect from midnight on Friday the 10th of May. All these factors rocked the market and helped complete the necessary technical correction.

The sixth round of voting for 59 seats was completed on Sunday the 12th of May. The seventh and final round of voting would be held next Sunday on 19th of May for 59 seats.

Yogi Deveshwar, Chairman Emeritus of ITC passed away at the age of 72 years. He was credited for changing the tobacco and cigarettes company to a large conglomerate having diversified portfolio of paper, hotels and FMCG products. Today less than half of its revenues comes from tobacco related products and the broader portfolio generates to the bottom-line.

What does the week ahead hold for the markets? It will continue to be volatile and choppy with two sided movements, however this time with an upward bias. Exit polls would be available only on Sunday evening next week and that would not impact trading this week. The strategy would be to look at corporate results and invest in companies which have shown growth with improved efficiencies. There are quite a few examples of such companies. One glaring example would be PNB Housing Finance which post results gained sharply on Friday. Further the parent, PNB Bank has sold stake at a premium of 20% plus to an investor. The stake sale price was Rs 850. Look for many such ideas in the market place. It should be remembered that value can only be found at times of stress or pain.

The strategy for the week ahead would be to remain calm and buy on sharp dips and sell on rallies. By the time you would be reading a similar column in the coming week on Monday the 20th of May, markets could be all over the place reacting to exit poll. One should note that exit polls are based on sample and have a lot of bias in them. Do not get carried away by them and when you have waited for a long 39-day election period, might as well wait for another 4 days for the results.

In conclusion, I strongly believe that markets may open weak on Monday morning but would certainly close in the positive.