With a three-day week, expect momentum to break

New Delhi: Markets were on a roll during the last week and the volatility seems to have reduced. The visible change was the fact that they just rose and were moving towards a nice set-up where they could go in either direction.

With last week’s moves, they are within striking distance of new lifetime highs. The broad markets more than regained the previous week’s losses. BSE SENSEX gained 1,341.47 points or 1.85 per cent to close at 74,005.94 points, while NIFTY gained 446.80 points or 2.03 per cent to close at 22,502.00 points.

The broader markets saw BSE100, BSE200 and BSE500 gain 2.40 per cent, 2.91 per cent and 3.23 per cent, respectively. BSEMIDCAP was up 4.92 per cent, while BSESMALLCAP was up 5.65 per cent. Markets gained on five of the six trading sessions during the week. They were open on Saturday as well, with a view to testing the disaster recovery site that the exchanges have.

The Indian Rupee gained 16 paise or 0.19 per cent to close at Rs 83.34 to the US Dollar. Dow Jones continued its strong showing and crossed the 40,000 mark. It gained on three of the five trading sessions and lost on two.

It was up 490.95 points or 1.24 per cent to close at 40,003.59 points.

There were three listings during the week. The first was Indegene Limited, which had issued shares at Rs 452. The share made its debut on Monday at BSE at Rs 659.70, a gain of Rs 207.70 or 45.95 per cent.

It then made a low of Rs 527.80 and closed at Rs 570.65. On NSE, it debuted at Rs 655, on debut day, made a low of Rs 527.10 and closed at Rs 570.90, a gain of Rs 118.90 or 26.30 per cent. By Saturday, the share lost further ground and closed at Rs 556.05, a gain of Rs 104.05 or 23.02 per cent.

The second share to list was TBO TEK Limited, which had issued shares at Rs 920. The share debuted at Rs 1,380 on BSE and Rs 1,426 on NSE. It closed on Wednesday, debut day at Rs 1,404.85, a gain of Rs 484.85 or 52.70 per cent. On NSE, the close was at Rs 1,406.30. The share gained further ground and closed at Rs 1,463.90, a gain of Rs 543.90 or 59.12 per cent on Saturday.

The third share to list was Aadhar Housing Finance Limited, which had issued shares at Rs 315. The debut price was 314.30 on BSE and Rs 315 on NSE. The low the share made was Rs 293.35 on BSE and Rs 292 on NSE.

The high was Rs 343.20 on BSE and Rs 343.70 on NSE. The share closed on Wednesday at Rs 329.55, a gain of 14.55 or 4.61 per cent. By Saturday, the share gained marginally and closed at Rs 348.60, a gain of Rs 33.60 or 10.67 per cent.

The issue from Go Digit General Insurance Limited, which had tapped the markets during the week, saw the issue get overall subscribed 9.6 times. The price band was Rs 258-272. The QIB portion was subscribed 12.56 times, the HNI portion was subscribed 7.24 times, and the Retail portion was subscribed 4.27 times. There were 5.85 lakh applications in all.

The week ahead has two trading holidays and, therefore, will have just three trading sessions. The week begins with a holiday on account of voting for the fifth round of elections to be held on Monday, amongst other places in Mumbai. This would be followed by a holiday on Thursday as well, breaking the momentum which one saw being built up during the previous week.

Post the week, we would have entered the business end of the general elections with just the sixth and seventh rounds left. The final round is on June 1, which is a Saturday. That evening, we would be bombarded by exit polls of all colours and hues, and markets would get a fair sense of what results would be like on Tuesday when they are finally declared.

As of the time of writing, the markets very firmly believe that the ruling dispensation would win the elections and have a consecutive third term. The ruling party, which won 303 seats in the 2019 elections, is expected to win around 330 seats, and the allies another 45-50 seats. This is what the markets believe, and that gives the strength and momentum being witnessed. This would get fine-tuned as the week ahead progresses.

Coming to the markets in the short three-day period ahead, expect markets to remain volatile and choppy. We have immediate support at the lows made over the last month at 21,800-21,900 on NIFTY. While they look far away currently, a week ago, they were almost there. On the resistance side, with just a three-day week, all-time highs of 22,800 points would act as strong resistances.

The strategy for the week would be to enter select midcap and small-cap stocks, which have had good results for the quarter and year ended March 2024. Markets are on a strong wicket, and with institutional players either long or short, there would have to be some sort of reversal of roles from FPIs sooner or later. The domestic institutions, because of very strong domestic flows, would have to continue to invest in the near term.

In conclusion, the climb upwards will be slow but certain. This bull run is unlikely to end very shortly, even though there would be profit-taking at every level.

Trade cautiously.

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