The week gone by began on an extremely quiet note not giving any indications of the storm ahead. The first two days saw the markets fall further but make very small losses and then it regained as if hell hath no fury. It rebounded quite sharply and recovered to begin the month of March on a very positive note. BSESENSEX gained 1,134.48 points or 1.55% to close at 74,332.58 points while NIFTY gained 427.80 points or 1.93% to close at 22,552.50 points. The broader markets saw BSE100, BSE200 and BSE500 gain 2.38%, 2.56% and 2.88% respectively. BSEMIDCAP gained 3.36% while BSESMALLCAP was up 5.86%. The top sectoral gainers were metal and capital goods while the one to perform the least was the Banking sector.  Our markets lost on the first two sessions and gained on three. 

The Indian Rupee gained 62 paisa or 0.71% to close at Rs 86.87. Dow Jones had a very volatile week gaining on two of the five trading sessions and losing on three. It was down 1,039.19 points or 2.37% to close at 42,801.72 points. 

The lows made on the BSESENSEX and NIFTY on Tuesday were at 72,633.54 points and 21,964.10 points respectively while the highs made on Friday were at 74,586.43 points and 22,633.80 points. Just goes to show the effect of the rebound on Tuesday and the extent of damage that happened when the low was made. It maybe important to also highlight that despite the sharp recovery in the week, the March series is up a mere 7.45 points after six trading sessions as the opening day of March futures on 28th of February were very weak and we saw NIFTY lose 421 points. Its also important to understand that though markets have rebounded, and the bottom made for the time being, the base is yet to be established. Readers would recall that on the downside, the band of 22,800-22,900 points acted as support on multiple occasions and when it gave way, we lost almost 900 points in next to no time. Now on the way up, this band would act as a strong resistance and would have to be pierced with news flow and tremendous buying pressure before it is surmounted. In short, a herculean task.  

What led to this rally is something which should weigh on the minds of all market participants. The Dollar index has weakened from about 109-110 to about 104, signifying that global currencies are becoming stronger and the dollar weakening. This led to a sharp rise in metal stocks. Secondly, people are more confused about tariff wars taking place in the US and there appears to be no clarity on what will happen. Auto makers set up factories to make components in Mexico so that they could benefit from cheaper wages in Mexico. If they have to pay the tariffs now, the entire advantage of creating that eco-system would be lost. Sweeping statements at the time of elections were fine but reality is certainly tougher. 

Further the prices cooling off in India have made many more stocks affordable and offer some value for money. A select pack from the midcap and small cap also fall in this category, but caution needs to be exercised as many stocks have gained double digit in the week gone by. One needs to shop wisely while still maintaining a bias in the large cap stocks. FPI selling has continued so far barring an isolated day here or there but could see signs of tapering off. At the same time one may also see the local institutions slowing down their purchases in the near future. 

Going forward we will continue to have volatility in our markets. Expect markets to trade in a broad band with immediate resistances being in the broad zone of 22,800-22,900 on NIFTY and at 75,000-75,300 points on BSESENSEX. On the support side while the lows made on Tuesday the 4th of March would be solid support, the band around these levels in plus or minus 50 points would be a better way to look at things. Prior support would be higher at 22,250-22,300 points on NIFTY and at 73,400-73,650 on BSESENSEX.

While we seem to have recovered from the falling trend last week, to conclude that the trend has become a rising trend and markets are back to their old ways is a long way off. Results for the January-March quarter would begin to be announced in a month’s time from now. Please bear in mind that the correction witnessed was on account of valuations and if results for the upcoming quarter do not show a substantial growth in performance on revenue coupled with profitability, things could worsen. 

The strategy for the week ahead would be to look at large cap and a select group of midcap and small cap stocks. Do not fall prey to stocks which may already have risen 15-20% I n the rebound. 

Trade cautiously.

It was a tough four-day week for the markets as we had a bad Monday and Friday where markets fell sharply. Thursday was expiry day where benchmark indices were more or less flat but midcap and small cap gave way. At the end of it all it was a week which investors would like to forget in a hurry. BSESENSEX gained on two and lost on two sessions while NIFTY lost on all four trading sessions. BSESENSEX lost 2,112.96 points or 2.81% to close at 73,198.10 points while NIFTY lost 671.20 points or 2.94% to close at 22,124.70 points. The broader markets saw BSE100, BSE200 and BSE500 lose 3.38%, 3.55% and 3.81% respectively. BSEMIDCAP was down 4.41% while BSESMALLCAP lost 6.05%. 

The Indian Rupee lost 79 paisa or 0.91% to close at Rs 87.49 to the US dollar. Dow Jones gained on three of the five sessions and lost on two. It gained 412.89 points or 0.95% to close at 43,840.91 points. The volatility in the US markets has increased significantly and this is becoming worrisome. At the end of Thursday the weekly change was negative with markets down cumulatively 187 points, and then on Friday the whole was reversed with Dow gaining 612 points. This kind of movement is worrisome and indicates that the underlying sentiment has a lot of fear lurking. 

Thursday the 27th of February saw futures for February series expire. Bulls and bears held on to their position as markets went nowhere on that day with NIFTY losing a mere 2.5 points on expiry day. However, for the series the loss was 704.45 points or 3.03%. The series closed at 22,545.05 points. 

On the primary market front, we had the listing of Quality Power Electrical Equipment Limited, which listed on Monday the 24th of February. The issue price was Rs 425. The share debuted at Rs 432.05 and closed on Monday at Rs 387.05, a loss of Rs 37.95 or 8.92%. By Friday, the share lost further ground and closed at Rs 376.55, a loss of Rs 48.45 or 11.38%. Very clearly the market in its present mood is very harsh on any IPO where the valuation is stretched. It does not spare anyone.  If one were to look at the new issues which have listed in the last 10 weeks, of the 20 main board issues as many as half are in the red, which means below their issue price. This does not take into account the fall from their highs which was typically made immediately after listing over the next ten days or so. 

In such a brutal market, one hopes and prays that merchant bankers are able to temper the expectations of promoters waiting on the sidelines to open their issues. Valuations have to be moderated, failing which the issues will meet a fate which no one desires or hopes for.  

Markets are in a bad shape to say the least. While the fall from all-time highs made in September24 is a little over 15%, the impact is much more. New investors who joined the markets post covid beginning from March 2020 onwards, have never experienced a correction and that too one lasting over six months. This is a new learning and we are quite close to entering a bear market if the fall continues. 

The new SEBI chief has been announced. Tuhin Kanta Pandey has assumed office as the SEBI Chairman. He is the 11th Chairman. Prior to his appointment he was the serving Finance Secretary. He was Secretary at DIPAM, which handles the divestment program of the Government of India.  He understands Capital Markets and is not new to this important aspect of capital formation and markets. Expect SEBI to fire on all cylinders going forward. 

Coming to the markets in the week ahead, expect volatility to continue. FPI selling has continued and the only reason for it to stop could be if markets in US start correcting. The sell India and buy China markets is currently on as the valuations in China are attractive but tending to neutralize as valuations rise. In India, one could see interest in the benchmark indices underlying stocks coming as they start becoming attractive to invest. Not suggesting a turnaround anytime soon, but just the thought. As far as midcap and small cap sectors are concerned, the valuations there need plenty to correct.

Support for the NIFTY is around the 21,800-21,850 level in the coming days and further lower around 21,200-21,300 levels. They seem far off, but in the present mood we need to have some back up as well. These levels would correspond to 72,00-72,150 on BSESENSEX and followed by 70,200-70,500 points. On the resistance front, we had lot of support at 22,800 on NIFTY which would act as very strong resistance corresponding to 75,200-75,300 points. The strategy would be to look for pockets of support in the benchmark indices and large cap basket only. As far as midcap and small cap stocks are concerned, one may begin an exercise of identifying quality growth stocks which have weathered the storm and corrected as well. Not hinting at buying, but just short listing. 

In conclusion, trade cautiously and protect your capital.