Markets were choppy and volatile. Geopolitical news seems to be dominating the world theatre currently. Whether Donald Trump is in the midst of beginning World War III or he believes no one takes him seriously has become a talking point. In the midst of all this turmoil, our markets gained on two of the four trading sessions and lost on two. At the end of the week while BSESENSEX lost 5.89 points or 0.01% to close at 83,570.35 points while NIFTY gained 11.05 points or 0.04% to close at 25,694.35 points. BANKNIFTY gained 843.60 points or 1.42% to close at 60,095.15 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.20%, 0.08% and 0.06% respectively. BSEMIDCAP lost 0.26% while BSESMALLCAP lost 0.42%. The top sectorial gainers were BSEMETAL which gained 4.52 points. The PSU banks fine performance helped the BSEBANKEX gain 2.02%. Similarly BSEIT chipped in with gains of 2.66%. The top loser was BSE CAPITAL GOODS which was down 2.49%. 

One very interesting facet of trading last week was the intraweek lows and highs made on the benchmark indices. The lows were made on Monday when markets broke the level of 25,500 points. They went down to record a low at 25,473.40 points. From there they rose in just one day to hit the intraweek high on Tuesday itself at 25,899.80 points and then corrected. Friday was a smart movement day, yet the high was 25,873.50 points and the close at 25,694.35 points. Similar levels on BSESENSEX were at 82.861.07 low made on Monday, intraweek high made on Tuesday at 84,258.03 points and high on Friday at 84,134.97 points. 

The Indian Rupee was under pressure and lost 61 paisa or 0.68% to close at Rs 90.77 to the US Dollar. Dow Jones gained on two of the five trading sessions and lost on three. It was down 144.74 points or 0.29% to close at 49,359.33 points. 

The PSU offering from Coal India’s subsidiary, Bharat Coking Coal Limited was a runaway success. It created a new record for receiving the highest number of applications ever by a PSU company. The record would now stand at 90.45 lakh forms, a feat which would need some beating. The earlier PSU record was held by LIC of India. In all issues, the record continues to be held by Waaree Energies Limited with a tad over 97 lakh applications.  The issue would list on Monday the 19th of January. The allotment price is Rs 23 per share. 

The US has proposed to levy additional tariffs of 10% on 7 countries of Europe over their ‘dangerous game’ of sending military to Greenland. The behavior of the US President seems to be like that of the spoilt brat who wants every toy that his friends have. Here, toy is territory. Next in line following Trump would be Putin in Ukraine and China in Taiwan. So much so for trade pacts and UN and so forth. Enough is enough. This has to stop sooner than later. Things just cannot go on like this. 

Markets are in a trading zone. We managed to take support at 25,500 points after going down last week. This area would act as support. Further at these levels there could always be downward pressure before a rebound. Similarly levels of 25,900 would act as short resistance and higher up at 26,200 points. Upward movement beyond that looks difficult and highly unlikely this month. 

The Union Budget would be presented on Sunday the 1st of February and trading on that day would be a normal day from 9 am to 3.30 pm. The same has been notified by exchanges already. Traders and investors could and should keep this in mind as there could be pleasant surprises in store considering the geo political situation currently. 

The trading strategy would be to lie low and allow the big bully make statements on a daily basis. At some point of time there would be revolt from within that nation as things take a turn for the worse. Till that happens we would have to tolerate this person. 

The time to be extra cautious in the markets in now and one would have to be on guard over the next 9 days before Budget day. 

Trade cautiously.

The week gone by was one which markets would like to forget in a hurry. We lost on all five days of the week and are back where we began the rally, all over again. When the week closed on Friday, it looked like next week would be yet another new high and now it appears as how much lower can it go. Very clearly, markets teaches us all a lot of things, including hope and pessimism, expectations and assumptions.  What we have to learn on our own is tempering all of this and taking it in our stride. BSESENSEX lost 2,185.77 points or 2.55% to close at 83,576.24 points while NIFTY lost 645.25 points or 2.45% to close at 25,683.30 points. BANKNIFTY lost 899.40 points or 1.50% to close at 59,251.55 points. The broader indices saw BSE100, BSE200 and BSE500 lose 2.44%, 2.54% and 2.62% respectively. BSEMIDCAP lost 2.60% while BSESMALLCAP lost 3.87%. All the sectorial indices on BSE except BSE CONSUMER DURABLE ended in the red with the biggest loser being BSEOIL&GAS, down 5.69%. The NIFTY from the intraday high of 26,340 made on Friday the 2nd of January in five trading sessions fell to a low of 25,623 points, a fall of 717 points. Effectively, this was the entire trading range over the last few months. 

The Indian Rupee lost 3 paisa or 0.03% to close at Rs 90.16. Dow Jones was riding a wave and gained on four of the five trading sessions and lost on just one. It was up 1,121.68 points or 2.32% to close at 49,504. 07 points. 

There are two IPOs on the main board in the week ahead. One, Bharat Coking Coal Limited has opened on Friday the 9th January and would close on Tuesday the 13th of January. The price band of the issue is Rs 21-23. The issue was subscribed 8.09 times on day one. 

The second issue is from Amagi Media Labs Limited which is tapping the capital markets with its issue which opens on Tuesday the 13th of January and closes on Friday the 16th of January. The price band of the issue is Rs 343-361. The issue consists of a fresh issue of Rs 816 crores and an offer for sale of 2.69 crore shares. The company is Bengaluru based and simplifies complexity of media operations. It eliminates the traditional requirement of having ‘OB’ vans for outdoor events and moves the entire hardware and back office required, to cloud. It then offers these services through a ‘SAAS’ model. Amagi offers these services globally and currently roughly 73% of revenues come from USA, 17% from Europe and the rest from the rest of the world. The business can also be described as a glass to glass offering- which means from camera to your device, which could be a mobile phone or a television set. To monetize revenue it can personalize advertising to any extent. Total revenues were Rs 1,163 crores for the year ended March 25 and Rs 705 crores in the first six months of the current financial year. The company enjoys gross margins of 69% but made losses at the PAT level last year. EBITDA which was minus 21% last year has moved to plus 8% in the first six months and the company is PAT positive now.

There is no PE multiple as there is no EPS. Based on six months earnings it would look expensive no doubt. Investment in the company should only be made looking at the opportunity and the fact that this is a new technology which has just taken off and is becoming popular, with miles to go. There is hardly any competition for the company at present. Investment is warranted only for the medium to long term.

Geo-political tensions have increased with Trump now looking to impose tariffs of 500% on China, India, Brazil and Russia because of Russian oil imports. In effect while South Africa is not in the picture, it’s effectively an assault on ‘BRICS’. The USA has also withdrawn from all the UN associations, very clearly signaling that he does not want to hear about anything that he does being called out. Not sure whether history books a few decades from now will refer to Trump as a ‘Dictator’. He also wants Greenland which is owned by Denmark. Not sure whether this would allow China to annex Taiwan on similar grounds as was done by USA in the case of Venezuela. Tough options and times ahead for all of us. 

Coming to the markets, we are currently heavily influenced by geo-political global cues which are not the best. FII inflows have been negative for a long time and are discounted. The rupee is under pressure and while the economy has been able to withstand global tariff pressures with multi trade deals, there is a nagging doubt about what next. I believe things will pass, it’s only a matter of time. Till then one will have to live with what happens. Budget at the beginning of February will also throw light on how India prepares to face the upcoming uncertain times.

The trading range in which markets have been moving, has shifted downward with support around 25,500-25,550 points. Resistance remains at 26,300 and higher up at 26,500 points. With last week’s fall, the higher levels look that much more distant and support levels look to close for comfort. 

Tough volatile times ahead of us. Trade cautiously.