Market volatility likely to increase

The week gone by began on a very ominous note and BSE Sensex lost almost 1,000 points on Monday itself. The remaining days of the week were spent in trying to recover from there and it was an uphill struggle with markets making some recovery but not enough to close in positive territory. BSE Sensex lost 425.14 points or 1.37 per cent to close at 30,672.59 points while Nifty lost 97.60 points or 1.07 per cent to close at 9,039.25 points.

The Indian rupee was under pressure and lost Rs 0.39 or 0.52 per cent to close at Rs 75.95 to the US dollar. Dow Jones ended the week with gains of 779.74 points or 3.29 per cent to close at 24,465.16 points.

RBI's monetary policy committee in its bi-monthly review meet cut repo and reverse repo rates by 40 basis points to 4 per cent and 3.35 per cent respectively. There is a plenty of liquidity in the system. But banks are unwilling to lend looking at the current crisis while business and industry is trying to limp back to normal. It's like a catch 22 situation, where unless you lend and take a risk with some bad debts and some delayed payment, there will not be any restoration of normalcy of the economy.

Reliance industries rights issue has opened and so has trading in the rights renunciation of the issue. There is a new development in the same which is being traded in electronic form and the premium is completely different from convention.

The week ahead will continue to be choppy and volatile with two sided movements. The market has a trading holiday on Monday and is therefore only a four-day week. May futures expire on Thursday the 28th of May and currently bears have the upper hand with the series down 820.65 points or 8.32 per cent.

While there can always be some recovery on this, it looks unlikely as the broader uncertainty in India on recovery from covid-19 and the same globally is quite sketchy and patchy. It would take a couple of months before the roadmap is out and things start falling in place. In such circumstances, the strategy would be to use rallies to sell and sharp dips to buy, but be very patient.