It was a tough week for the markets and Friday the 14th of February was unique in many ways. People celebrate the day as Valentine Day and it’s a day of red flowers, gifts and celebration. This time the markets were a sea of red with stocks hammered and butchered to levels which one could not even think of. Probably for the first time since the advent of covid in end-March 2020, one has seen new entrants to the stock market getting shaken so badly. This is part of learning and one must remember that the stock market is like a yo-yo and it has its ups and downs. It certainly is not a one-way street where prices just go up. BSESENSEX lost 1,920.98 points or 2.47% to close at 76,388.39 points while NIFTY lost 630.70 points or 2.68% to close at 22,929.25 points. The broader indices saw BSE100, BSE200 and BSE500 lose 3.51%, 3.97% and 4.65% respectively. BSEMIDCAP was down 7.71% while BSESMALLCAP lost 9.47%. In sectoral indices none ended in the green, reflecting all round selling and also a hint of panic. Markets lost on all five days of the week.
The Indian Rupee regained some lost ground and was up 59 paisa or 0.67% to close at Rs 86.83 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two. It was up 242.68 points or 0.55% to close at 44,546.08 points.
In primary market news, the subscription is getting impacted with the poor performance of secondary markets. The issue from Ajax Engineering Limited was subscribed an overall 6.45 times with QIB portion subscribed 14.41 times, HNI portion subscribed 6.47 times and Retail subscribed a mere 1.93 times.
Following this was the issue from Hexaware Technologies Limited which was subscribed an overall 2.79 times, entirely on the back of QIB participation. QIB subscription was 9.55 times. HNI and Retail portion were undersubscribed at 0.22 times and 0.11 times respectively. In what could be mentioned as surprising was the fact that even the employee quota was undersubscribed at a mere 0.33 times. Very clearly market sentiment is poor, there is no appetite for expensive or even marginally expensive issues and certainly not for offer for sale issues. It’s a wake up call for merchant bankers and one hopes they are listening.
Lows made by the benchmark indices were at levels of 75,388.39 points on BSESENSEX and at 22,774.85 points on NIFTY. These would act as support and also pivots. A relief rally after five consecutive days of fall last week and eight consecutive days since the previous week, is overdue. Whether it happens on Monday or subsequently is immaterial, it is overdue. The mood in this pull back rally would be different for different people. Some would use it as an opportunity to sell on strength, some would use it to punt the upward move and some would wait for things to improve and see their portfolio regain lost ground. What should one do, depends entirely on how one views the rally. Nothing has changed, all that was expected has happened and there is nothing amiss.
Mutual funds are sitting on a cash pile and do not know what to do with the money that comes their way. In the month of January there has been a small dip of Rs 1,500 cores on a base of Rs 40,000 crores in total SIP inflow. Not significant, but one hopes this is not a new trend and gathers momentum in the month of February. Inflation in the US has picked up and is not good news for those expecting further rate cuts. On the companies performance with results season over for the third quarter results, the expectation has been belied. Fewer companies have delivered stronger results compared to those producing average or below expectation results. The focus would now shift to the year end and annual results to see whether they can turn the corner and expectations.
Coming to the markets in the week ahead, one should expect some sort of a relief rally or break in momentum of the fall at the bare minimum. FPI selling is the order of the day and there is nothing that has happened that could change their view all of a sudden. Expect their selling to continue and if it subsides or stops, it should be taken as unexpected. We are at crucial levels of support and this could be a short-term bounce. The strategy for the expected rally should be to look at those stocks which could lead the rebound, dabble in them with strict stop losses, and exit at first point of weakness when the rally looks like getting over. In terms of rebuilding portfolios, its some time away and could be done later. In terms of safety, the same lies only in large cap stocks, and money should be invested there only.
Support as mentioned exists at the lows made last week and around 22,800-22,850 on NIFTY and at 76,000 on BSESENSEX. Resistance currently is at 23,250-23,300 and 77,200-77,350 respectively. This being crossed comfortably and maintained would be a subject matter for Expiry week.
The key factor is to conserve cash and trade cautiously.
