Markets made new intraday highs on the benchmark indices on all the four trading sessions of the week. Closing highs were made on the first three sessions and then all hell was let loose on the last trading session which was Friday. What we saw was probably the first setback after the 4th of June. It broke the back and momentum went for a toss. What next is the question on everybody’s mind. BSESENSEX gained 85.31 points or 0.11% to close at 80,609.65 points. NIFTY gained 28.75 points or 0.12% to close at 24,530.90 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.55%, 0.81% and 1.06% respectively. BSEMIDCAP was down 2.63% while BSESMALLCAP lost 2.86%. Suffice to say that the color of the markets was red on the trading screens. The IT and Tech sectors saved the market somewhat as they were big gainers, while Capital goods and metals were the big losers.

The intraday high made on Friday was 81,587.76 points on BSESENSEX while it was at 24,854.80 points on NIFTY. The losses that the markets suffered on Friday from their intraday highs was almost 1,000 points on BSESENSEX and 325 points on NIFTY. This kind of fall on virtually the eve of the budget, sets up an interesting week with the budget on Tuesday and July futures expiry on Thursday. Volatility in the markets would rise sharply and there would be plenty of two-sided moves. Markets gained on three of the four trading sessions, and lost on one.

The Indian Rupee lost 12 paisa or 0.14% to close at Rs 83.66 to the US Dollar. Dow Jones too had a very choppy and volatile week. It gained very sharply in the earlier part of the week and then fell equally sharply. In a week that saw Dow gaining on three of the five sessions, we saw Dow making an intraweek high of 41,221.98 points. Dow closed at 40,287.53 points, a gain of 286.65 points or 0.72%. Here too the reversal was very sharp and hit the markets badly.

What triggered the setback in our markets and globally as well. People may blame it on the massive outage that took place in Microsoft Edge, but that basically had no relevance. There was chaos in India as well and 100s of flights were cancelled on Friday and partly on Saturday. As well. Normalcy returned thereafter. It only shows how vulnerable the world has become.  

Results season is on and the outcome is a mixed bag. After TCS results, Infosys results were declared and they were marginally better than the street expected. However, because of negative sentiments in the markets about Infosys, saw the share rise sharply. It gained Rs 81 or 4.73% to close at Rs 1,791. The high it made was at Rs 1,842, a loss of Rs 51 from the highs. During the weekend four banks and Reliance Industries have declared results. In the present circumstances these results do not enthuse the markets and they would not be able to change the sentiment and drive markets upwards. 

The week ahead sees the budget being presented on Tuesday the 23rd of July. Expectations are that there would be announcement of some freebies and that income tax relief of Rs 50,000 or thereabouts would be announced at the bottom of the pyramid. Further there would be some mention of allocation to build the new capital of Andhra Pradesh after Hyderabad becoming the capital for Telangana. An allocation of special status for Bihar would further dent the resources available. While the buoyancy of revenue collection and the economy which is in fine fettle would increase allocable money for the FM, it would be a tightrope walk to balance expectations of all stakeholders. Probably allocation to growth driven infrastructure could see some hit. All of this could see the budget being a mixed bag from the market’s perspective. 

One possible view that emerges post the budget is, that there is no negative surprise and hence it is positive, could rally the markets. Otherwise by and large it could be a neutral budget from the market perspective. In any case, the biggest concern in the markets currently is valuations and they are skewed and tend to be in the expensive and uncomfortable zone. 

Post the budget presentation we have July futures expiry on Thursday the 25th of July. The present level of NIFTY at 24,530.90 points is higher by 486.50 points or 2.02%. While the lead favors the bulls currently, the fact that Friday saw an intraday fall of close to 325 points, the lead is not much. Further, the Budget in the middle could see sharp volatility. While currently the bulls have the upper hand, things could over the next four days change completely. 

In primary market news, we have the issue from Sanstar Limited during the week. The issue opened on Friday the 19th of July and would close on Tuesday the 23rd of July. The issue consists of a fresh issue of 4.18 crore shares and an offer for sale of 1.19 crore shares in a price band of Rs 90-95. The company is into the business of processing maize for use in food, pharma and cattle feed. The PE multiple for the company is between 18.95-20.00.  The main object of the issue is to increase the present capacity by almost double. This capacity would be available by the end of the current financial year. With present capacity utilization at a high 80% level, there is little scope for growth in the current year. With dilution there would be an impact on earnings. 

While there is a grey market currently in the shares, they do change as the issue progresses and lists. Investors with a long term view could take a look at the share once it is listed for some time, and then take a call. 

Coming to the markets in the week ahead, expect them to be choppy and volatile with two events ahead. The budget and July futures expiry will keep them in the thick of action. The strategy would be to continue to take money off the table and allow the budget to sink in over the next couple of days. FPIs have been giving confusing signals with their buying and selling alternating over time over the last month or six weeks. Geo political news over the last 24 hours are also a cause of worry. In such a fluid position ahead of important events, it becomes that much more imperative to have a light position and allow events to unfold. 

In conclusion, allow events to unfold and then take action. Trade cautiously.

It was an action-packed week with markets volatile but range bound for the first four days of the week. On Friday, it appeared that markets had taken steroids and gained sharply, making new highs on an intraday basis as well as closing basis. The sector rotation continues unabated and there is just a single point agenda that markets must be up and up and up. Friday post TCS results it was the turn of the IT sector and during the week it was helped by sharp moves in the FMCG sector as well. At the end of the week with markets gaining on two of the five trading sessions and losing on three, BSESENSEX was up 522.74 points or 0.65%, to close at 80,519.34 points. NIFTY gained 178.30 points or 0.73% to close at 24,502.15 points. The broader markets saw BSE100, BSE200 and BSE500 gain 0.65%, 0.58% and 0.47% respectively. BSEMIDCAP gained 0.15% while BSESMALLCAP was down 0.26%. 

The gains made on Friday were 624 points on BSESENSEX and 187 points on NIFTY, indicating that without Friday’s gains markets were actually in the negative. The intraday highs on BSESENSEX were at 80,893.51 points while the closing high was at 80,519.34 points. On NIFTY these levels were at 24,592.20 points on an intraday basis and at 24,502.15 points on a closing basis. 

The Indian Rupee lost 6 paisa or 0.07% to close at Rupees 83.54 to the US Dollar. Dow Jones gained on three of the five trading sessions and lost on two. It was up 625.03 points or 1.59% to close at 40,000.90 points. 

In primary market news, there were two listings which happened in the week gone by. The first share to list was Emcure Pharmaceuticals Limited which had issued shares at Rs 1,008. The discovered price was Rs 1,325, a gain of Rs 317 or 31.45%. By the end of the day, the share gained some ground and closed at Rs 1,358.85, a gain of Rs 350.85 or 34.80%. At the end of the week, the share gained some more and closed at Rs 1,361.95,  a gain of Rs 363.95 or 35.11%. Emcure shares listed on Wednesday the 10th of July. 

The second share to list also on Wednesday was Bansal Wires Limited The company had issued shares at Rs 256. The discovered price was Rs 352.05, a gain of Rs 96.05 or 37.51%. By the end of the day, the share lost some ground and closed lower at Rs 350.30, a gain of Rs 94.30 or 36.83%. By weekend, the share gained further ground and closed at Rs 356.40, a gain of Rs 100.40 or 39.22%. 

TCS declared results on Thursday the 11th of July. The company reported revenues of Rs 62,613 crores for the quarter against Rupees 59,381 crores in the previous year. Profit after tax was at Rupees 12,105 crores versus 11,120 crores. The EPS was at Rs 33.28 versus Rupees 30.26. The results could be termed as decent but certainly not inspiring. The share gained Rs 262.20 or 6.68% on Friday, post the results TCS was instrumental in pushing benchmark indices up, to a great extent. No other IT company has as yet declared results and on the back of TCS, IT sector gained a whopping 3.5% for the week. 

The budget is a mere six trading sessions away with there being a trading holiday on Wednesday the 17th of July, and budget to be presented on Tuesday the 23rd of July. Markets have not built up a big wish list as yet, however, markets have gained substantially. This is a cause for worry. The last 10,500 points on BSESENSEX and 3,400 points on NIFTY have come in double quick time and have happened in just about five weeks’ time.  This is too much in too short a time. To make markets healthy and sustainable we need a correction and we need it now. Whether they will oblige or not, only time will tell. 

The strategy for the four day week ahead would be to continue to take money off the table and move out of momentum stocks. Allow the budget to be presented as there could be some populist measures with some hard decisions also being taken. While in terms of overall, the budget would be growth oriented and conducive to development, the fine print could always have areas of concern. It therefore makes sense to lie low over the next six sessions and allow the budget to be presented and sink in. Post the same, it would be a good time to have a relook at markets and make a better choice and selection for the long term. Targets at such elevated and new levels are not necessary and suffice to say that we have plenty of support at various levels which would act as comfort if markets were to correct. 

Trade cautiously and avoid the temptation of buying in a red-hot market.