Markets began on a weak note and lost ground during the week. Unlike previous weeks there was a weak opening on Monday and that set the tone. The markets lost on the first three days of the week and recovered some ground on the remaining two days, but it was not enough to end in positive territory. BSESENSEX lost 233.25 points or 0.66% to close at 38,389.82 points. NIFTY lost 91.40 points or 0.79% to close at 11,589.10 points. The broader indices saw the BSE100, BSE200 and BSE500 lose 1.03%, 1.13% and 1.19% respectively.

August futures expired on Thursday the 30th of August with gains of 369.60 points or 3.20% to close at 11,536.90 points. The Indian Rupee continued to be under pressure and was down 74 paisa or 1.03% to close at Rs 71.73 Dow Jones lost 48.28 points or 0.19% to close at 25916.54 points.

SEBI has given some relief to funds managed by Indian Fund managers of HNI’s and people of Indian origin. Markets had been badly hit on this ground when trading began on Monday. With clarity on the same emerging there would be a strong undercurrent in the market place in coming days.

Primary markets are becoming active again and the government kicked of its roadshow of Ircon International Limited, which is a railway ministry issue and would be opening on Monday the 17th of September. More of this issue next week. Some more issues are expected in the week ahead and a couple of companies would have their road shows.

There is a SME IPO from Rajshree Polypack Limited which is tapping the markets with its fresh issue of 29 lac shares in a price band of Rs 119-121. The company is in the manufacture of rigid plastic sheets and thermoformed packaging products. It caters to the dairy industry with cups and containers for yoghurt and ice cream, food packing, QSR’s, coffee cups, bakery products and confectioneries amongst others. It reported sales of Rs 111.97 crs for financial year ended March 2018 with a net profit of Rs 9.31 crs.

The EPS for the year was Rs 11.67 which means that the PE for the offer is between 10.19 – 10.36 times. The closest competitor is Moldtek Packaging which had an EPS of Rs 11.44 for the financial year ended March 2018 and trades at a PE multiple of 27.74 times. Considering the differential, the issue looks attractive and going forward should offer opportunities for growth. The issue would be listed on NSE EMERGE and should hopefully migrate to the main board in due course of time. Subscribing to the issue merits attention.

Our markets are 600 points away from a new high on the BSESENSEX and 171 points in the case of NIFTY. The lows of the previous week were 696 points lower on the BSESENSEX and 196 points on the NIFTY. It could be therefore said that we are midway from the low of last week and a new high. Anything can happen, and one needs to be nimble footed in the marketplace.

Thursday is a trading holiday and would break momentum mid-week. Markets would remain choppy and volatile. Trade cautiously.

The week began with a bang with the BSESENSEX gaining a massive 432 points on Monday and this helped in registering gains on a weekly basis. The BSESENSEX gained 393.27 points or 1.02% to close at 38,645.07 points. NIFTY gained 123.40 points or 1.06% to close at 11,680.50 points. Market breadth was in favour of the bulls and there were no sectoral losers.

August series expired with gains of 509.50 points or 4.36% to close at 11,676.80 points. Bulls had an easy run this time around and were in full control of the series. At no point during the series, did it appear as if they were having a tough time. Markets continued to make new highs regularly.

In economic news, GDP for the first quarter of 2018-2019 grew at 8.2%. It’s an impressive number and comes after a long time of flattish GDP. The Indian Rupee was under tremendous pressure and lost Rs 1.08 or 1.52% to close at Rs 70.99 to the US Dollar. Petrol and diesel prices have hit new record levels in the country and the government would have to take corrective action with state elections around the corner.

Market rally has been chugging along with some fits and starts on the back of disbelief. General market participants seem to have virtually no position and are unwilling to bet on the long side because of geopolitical tensions and Trump histrionics. People on every rally are willing to short the market as they believe that fundamentals do not support the rally. It is this belief or disbelief which is driving the rally as every now and then we see short covering that then leads to market rallies.

Euphoria is the ingredient which fuels the rally and takes it to its logical end, culminating in a blow-off. This time around even though we have had a strong rally so far, the euphoria element is completely missing. We have gained over 3,600 points on the SENSEX since the last week of June. This is around the time when markets were adjusting to the new rules regarding mutual funds and the midcap and Smallcap definitions. It is this missing element that makes me believe that the rally is likely to get extended and may now last for a couple of more weeks to allow euphoria to set in. More time also means more distance to be travelled. The journey upward would be more painful and laborious and have more volatility. To be fair another 1200-1500 points on the SENSEX and two to three weeks could be a reasonable assessment. It should be borne in mind that this would have sharp movements as well and provide trading opportunities. This does not mean that the same must be achieved but it appears bulls are unlikely to give way before that.

What should the strategy be? Very clearly continue in the same way where one remains light and uses sharp rallies or dips to sell and buy respectively. The coming days would see greater volatility on a daily and intraday basis and see volumes expanding. These would be early signs that we are heading to euphoria and are n track for the same.

The week ahead would see several primary market issues having their roadshows and they would be led by the PSU stable. The government has not had any issues in the last few months after RITES which listed in July 2018. With public focus shifting to primary issuances and there being every possibility that some make good money and some not so good, the desired state of euphoria may just kick in.

Keep on the side-lines and as mentioned earlier use sharp movement only to trade.