It was a very quiet week at the bourses and the trading range of the markets seem to be reducing. However, movement continues to remain in negative territory with FPIs remaining sellers. There is a complete disconnect between valuations in the large cap space which are quite attractive from a medium term investment horizon and the midcap and small cap space which continue to remain more than rich. Yet, retail investors are attracted towards the latter. Primary markets continue to dominate markets and last week saw as many as six new mainboard listings including the much awaited NSE Limited. It’s a big fallacy that investors crib about the valuations in the secondary markets but pay much more when the issue taps the capital market. Wonder why.

Markets gained on three of the five trading sessions and lost on two. BSESENSEX lost 678.13 points or 0.91% to close at 73,881.44 points while NIFTY lost 218.30 points or 0.94% to close at 23,128.10 points. BANKNIFTY lost 778.30 points or 1.38% to close at 55,580.40 points. The broader markets saw BSE100, BSE200 and BSE500 lose 0.77%, 0.79% and 0.76% respectively. BSEMIDCAP lost 0.63% while BSESMALLCAP gained 1.50%.

The Indian Rupee remained unchanged at Rs 95.98 to the US Dollar. Dow Jones gained 145.98 points or 0.28% to close at 51,828.62 points. Dow Jones gained on two of the five trading sessions and lost on three. The US goes to vote on the 3rd of November and the belief on the ground in the USA is that Trump would be on the receiving end. His call that he would give 5000 $ to every American who voted for the Republicans is a telling statement. We all know what freebies has done to the elections in India. Imagine what would happen if the same is adopted as standard practice in the USA. I get goose bumps and sleepless nights. Five weeks to the countdown.

There were six listings on the bourses last week. The center of attraction remained NSE Limited which had issued shares at Rs 1,785. The share debuted on Thursday the 24th of September at Rs 1,800 and made a high of Rs 1,878 before closing at Rs 1,818, a gain of Rs 33 or 1.85%. On Friday, the share lost ground and closed at Rs 1,792.65, a gain of Rs 7.65 or 0.43%. The performance could at best be termed as muted and it would be interesting to see how investors react if the share slips below the issue price of Rs 1,785.

The other five listings were from Sona Selection, SS Retail, Jindal Supreme, Hero Motors Limited and Manika Plastech Limited. The outstanding performance was from SS Retail which gained 71.54% while Hero Motors gained 68.87%.

There is a three day bank strike beginning from Monday the 28th of September and ending on Wednesday the 30th of September. One is not sure what would be the fate of issues which are closing during the period. I believe it would be business as usual and SEBI would allow companies to take their own call for extension. Stock exchanges are functioning and online applications are the order of the day. If anyone wishes to extend it would have to be as per SEBI regulations where the price band is to be lowered and then extended.

The week ahead sees September futures expire on Tuesday the 29th of September. The current value of NIFTY futures at 23,128.10 points is very heavily tilted in favor of bears who have a lead of a massive 1,131.95 points or 4.67%. With two days to go, there is no way that they can recover. At best there could be some partial recovery if things improve. Two points that could help the bears are enumerated. Oil continues to trade around 102-103$. However, currently Saudi Arabia is shipping close to 6 million barrels per day, a level which they were doing before the Iran-USA war broke out. This shows things are streamlining and will continue to improve, until Trump does the contrary. Secondly, we are coming to the end of Quarter two (July-September) and markets would look at results in another 10 days. With things remaining largely steady during the period, results could provide some ray of hope. A data point to add would be that the lows on the BSESENSEX and NIFTY were made on Friday while the highs were made on Tuesday.

Markets would continue to wait for geo political news flow to drive them. The lack of them could actually be positive news. Support for the NIFTY exists in the range of 22,650-23,800 points while resistance is at levels of around 23,650-23,800 points.

The strategy would be to look at sharp dips to enter the large cap space and use sharp rallies to exit what you would have purchased recently. In short, it’s a trading market with an eye on portfolio building for the coming two years.

Trade cautiously.

Arun Kejriwal (Market Veteran Investor & Opinion Maker)