Momentum with the bulls – Market Watch

Sensex down

The week gone by behaved on expected lines and made an intraday low on Thursday before bouncing from there and registering very sharp gains in the remaining less than two days of the week. BSE SENSEX gained 429.10 points or 1.38 per cent to close at 31,588.72 points while NIFTY gained 154.85 points or 1.70 per cent to close at 9,266.75 points. The broader markets saw BSE100, BSE200 and BSE500 gain 1.98 per cent, 2.15 per cent and 2.38 per cent respectively. BSE MIDCAP was up 3.95 per cent while BSE SMALLCAP was up 4.93 per cent.

The intraweek low made on Thursday on the BSE SENSEX was at 30,016 points, which was a loss of 1,140 points till then, while it was 8,821.90 points on NIFTY, a loss of 290 points. The recovery from the intra week lows in less than two days was 1,570 points on BSE SENSEX and 445 points on NIFTY. This momentum has steam and would carry the markets higher in the coming week and it would be worth watching how far this rally can go before profit taking steps in.

One must remember that the markets are like a patient and are yet to recover fully. What we are witnessing is relief rally, oversold rally or a rally by any other name that you can think of. Fundamentals of the market are yet to kick in and they would do so only when covid-19 is under full control and one can say that life has normalised.

The Indian Rupee after being extremely volatile settled with a marginal gain of 4 paisa or 0.03 per cent to close at Rs 76.39 to the US Dollar. Dow Jones had a good week and gained 523.12 points or 2.21 per cent to close at 24,242.49 points.

RBI cut reverse repo rates by 25 basis points to 3.75 per cent from the earlier four per cent, signalling to the market that banks should lend and that the system is full of liquidity. Whether banks will lend is a million-dollar question as the 90-day moratorium is a contentious issue going forward and complete clarity on provisioning norms post the 90 day are yet to emerge.

HDFC Bank reported an excellent set of numbers even considering the fact that it was only the last fortnight of March 2020 that was impacted by covid-19. The net profit for the 4th quarter rose 18 per cent to Rs 6,928 crores.

The government has restricted the investment by neighbouring countries in Indian companies under the automatic route and they would have to now invest under government route and not under the FDI policy. This has been issued after PBOC, raised its stake in HDFC Bank from the earlier 0.8 per centto over one per cent. SEBI raised queries on such investments and this was followed by the government release.

SBI Card which was an extremely hyped and controversial issue, completed thirty days of being listed on the bourses. This 30-day period is significant because the allocation to anchor investors comes with a 30-day lock-in. On completion of the same, anchor investors are free to sell. The share which was issued at Rs 755 and had created huge hype and demand and was oversubscribed 26.49 times overall saw its share touch a low of Rs 501.10. This means that the share has lost a third in value and the issue was oversubscribed 56.66 times by QIB”s and they have a reasonable time frame view on the share unlike the HNI, whose investment horizon is less than 48 hours. This loss is without considering the grey market premium which varied between 225-275 for about three months prior to the issue and touched a peak of just short of Rs 400. Understandable that covid-19 has impacted the business of SBI Card as well but to what extent? The share did recover from the lows to close at Rs 530.70, a weekly loss of Rs 64.15 or 10.78 per cent.

Coming to covid-19, the total number of cases globally have risen to 23.33 lac cases with there being 1,60,818 deaths and over 6 lac patients recovering. In India the number of affected persons has increased to 16,365 cases with 521 deaths and 2,466 patients having recovered. There seems to be a larger number of patients recovering than before which is a positive sign.

Coming to the markets in the week ahead, the momentum of the last two trading sessions will keep the market going in the initial part of the week after which there would be profit taking as well. This does not mean that this would signal the end of the rally but then markets would look to the expiry of April futures and how the relaxation of lock-down and reopening of factories happens. The rally should be more than what was gained on a weekly basis in the previous week before the profit taking.

In conclusion, a rally followed by profit taking and then cues from the lockdown to determine the flow of the market in the week ahead.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)

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